CTLA4 ligands are important costimulatory molecules because soluble CTLA4Ig blocks the induction of T cell responses and induces T cell tolerance. As CTLA4 immunoglobulin (CTLA4Ig) binds B7 when the latter is expressed on fibroblasts, it was widely assumed that CTLA4Ig blocks T cell costimulation by blocking the function of B7. Here we show that the major costimulatory ligand bound by CTLA4Ig (which we term CTLA4 ligand A) on antigen-presenting cells are not encoded by the B7 gene. CTLA4 ligand A also differs from B7 in cellular distribution and in the respective levels of expression. Both B7 and CTLA4 ligand A are critically involved in T cell costimulation.