Activation of naive CD8 T cells to undergo clonal expansion and develop effector function requires three signals: (a) Ag, (b) costimulation, and (c) IL-12 or adjuvant. The requirement for the third signal to stimulate Ag-dependent proliferation is variable, making the greatest contribution when Ag levels are low. At high Ag levels, extensive proliferation can occur in vitro or in vivo in the absence of a third signal. However, despite having undergone the same number of divisions, cells that expand in the absence of a third signal fail to develop cytolytic effector function. Thus, proliferation and development of cytolytic function can be fully uncoupled. Furthermore, these cells are rendered functionally tolerant in vivo, in that subsequent restimulation with a potent stimulus results in limited clonal expansion, impaired IFN-γ production, and no cytolytic function. Thus, the presence or absence of the third signal appears to be a critical variable in determining whether stimulation by Ag results in tolerance versus development of effector function and establishment of a responsive memory population.