CD8⁺ T lymphocytes mediate immunosurveillance against persistent virus infections and virus-induced neoplasia. Polyoma virus, a highly oncogenic natural mouse DNA virus, establishes persistent infection, but only a few mice are highly susceptible to tumors induced by the virus. Mature antiviral CD8⁺ T cells expand in tumor-susceptible mice, but their cytotoxic effector activity is nonfunctional in vivo. Here we show that the natural killer cell inhibitory receptor, CD94-NKG2A, is up-regulated by antiviral CD8⁺ T cells during acute polyoma infection and is responsible for down-regulating their antigen-specific cytotoxicity during both viral clearance and virus-induced oncogenesis.