We describe here a newly identified member of the human B7 family, designated B7 homolog 3 (B7-H3), that shares 20–27% amino acid identity with other B7 family members. B7-H3 mRNA is not detectable in peripheral blood mononuclear cells, although it is found in various normal tissues and in several tumor cell lines. Expression of B7-H3 protein, however, can be induced on dendritic cells (DCs) and monocytes by inflammatory cytokines and a combination of phorbol myristate acetate (PMA)+ ionomycin. Soluble B7-H3 protein binds a putative counter-receptor on activated T cells that is distinct from CD28, cytotoxic T lymphocyte antigen 4 (CTLA-4), inducible costimulator (ICOS) and PD-1. B7-H3 costimulates proliferation of both CD4+ and CD8+ T cells, enhances the induction of cytotoxic T cells and selectively stimulates interferon γ (IFN-γ) production in the presence of T cell receptor signaling. In contrast, inclusion of antisense B7-H3 oligonucleotides decreases the expression of B7-H3 on DCs and inhibits IFN-γ production by DC-stimulated allogeneic T cells. Thus, we describe a newly identified costimulatory pathway that may participate in the regulation of cell-mediated immune responses.