Ag-specific proliferation of CD4+ T cells is regulated, in part, by costimulatory signals through CD28. The proliferative response during primary activation is an important determinant of the ability of the T cell to respond to Ag re-encounter. Proliferation of mature CD4+ T cells during lymphopenia (homeostatic proliferation) requires interaction with endogenous peptide MHC. However, the role of costimulation during homeostatic proliferation is unclear, as is the ability of homeostatic proliferation to regulate secondary T cell responses. Using a TCR transgenic system and serial adoptive transfers we find that homeostatic proliferation of CD4+ T cells occurs for at least 5 wk after adoptive transfer into recombination-activating gene (RAG)−/− recipients. Two discrete populations of proliferating T cells can be resolved, one that is highly proliferative and dependent on CD28 signaling, and the other that contains cells undergoing low levels of CD28-independent proliferation. Importantly, naive CD4+ T cells that have undergone homeostatic proliferation acquire both phenotypic and functional characteristics of true memory cells. These studies indicate that functional memory T cells can be generated by encounters with endogenous Ags only. This mechanism of T cell regeneration is possibly active during lymphopenia due to viral infections, such as HIV, transplantation, or cancer therapy, and may explain selected autoimmune diseases.