The calcium-dependent phosphatase calcineurin and its downstream transcriptional effector nuclear factor of activated T cells (NFAT) are important regulators of inducible gene expression in multiple cell types. In T cells, calcineurin-NFAT signaling represents a critical event for mediating cellular activation and the immune response. The widely used immunosuppressant agents cyclosporin and FK506 are thought to antagonize the immune response by directly inhibiting calcineurin-NFAT signal transduction in lymphocytes. To unequivocally establish the importance of calcineurin signaling as a mediator of the immune response, we deleted the gene encoding the predominant calcineurin isoform expressed in lymphocytes, calcineurin Aβ (CnAβ). CnAβ^−/− mice were viable as adults, but displayed defective T cell development characterized by fewer total CD3 cells and reduced CD4 and CD8 single positive cells. Total peripheral T cell numbers were significantly reduced in CnAβ^−/− mice and were defective in proliferative capacity and IL-2 production in response to PMA/ionomycin and T cell receptor cross-linking. CnAβ^−/− mice also were permissive to allogeneic tumor-cell transplantation in vivo, similar to cyclosporin-treated wild-type mice. A mechanism for the compromised immune response is suggested by the observation that CnAβ^−/− T cells are defective in stimulation-induced NFATc1, NFATc2, and NFATc3 activation. These results establish a critical role for CnAβ signaling in regulating T cell development and activation in vivo.