We have recently identified and cloned Foxp3, the gene defective in mice with the scurfy mutation. The immune dysregulation documented in these mice and in humans with mutations in the orthologous gene indicates that the foxp3 gene product, scurfin, is involved in the regulation of T cell activation and differentiation. The autoimmune state observed in these patients with the immune dysregulation polyendocrinopathy, enteropathy, X-linked syndrome, or X-linked autoimmunity-allergic dysregulation syndrome also points to a critical role for scurfin in the regulation of T cell homeostasis. FOXP3 encodes a novel member of the forkhead family of transcription factors. Here we demonstrate that this structural domain is required for nuclear localization and DNA binding. Scurfin, transiently expressed in heterologous cells, represses transcription of a reporter containing a multimeric forkhead binding site. Upon overexpression in CD4 T cells, scurfin attenuates activation-induced cytokine production and proliferation. We have identified FKH binding sequences adjacent to critical NFAT regulatory sites in the promoters of several cytokine genes whose expression is sensitive to changes in SFN abundance. Our findings indicate that the ability of scurfin to bind DNA, and presumably repress transcription, plays a paramount role in determining the amplitude of the response of CD4 T cells to activation.