The Epstein‐Barr virus (EBV) encodes an open reading frame with significant homology to the cellular IL‐10 gene. This viral IL‐10 (vIL‐10) might enable EBV to evade antiviral T cells. We employed transfectants of a murine tumor cell line (P815) to investigate whether vIL‐10 interferes with the first (antigenic) or second (co‐stimulatory) signal of T cell activation. Untransfected P815 cells caused tumors in syngeneic DBA/2 mice after s.c. inoculation. In contrast, transfectants that provided either a strong antigenic stimulus (P815‐K^b cells) or a strong co‐stimulatory signal (P815‐B7 cells) were rejected. Injection of double‐transfected P815 cells expressing K^b and secreting high levels of vIL‐10 (P815‐K^b ‐vIL‐10) did not result in tumor growth. We then investigated whether vIL‐10 could paralyse co‐stimulation by B7 under the same conditions. Therefore P815‐B7 cells were mixed with vIL‐10‐secreting P815‐K^b cells and co‐injected into DBA/2 animals. Most of these mice developed a tumor. Explanted tumor cells expressed the B7 molecule but not the K^b antigen. These observations in vivo were mirrored by experiments in vitro: vIL‐10 could induce T cell tolerance towards P815‐B7 cells but not P815‐K^b cells. Taken together our results suggest that vIL‐10 acts directly on T cells to inhibit co‐stimulatory signals mediated via B7 receptors such as CD28 or CTLA‐4.