Ig-PLP1 is an Ig chimera expressing proteolipid protein-1 (PLP1) peptide corresponding to aa residues 139-151 of PLP. Newborn mice given Ig-PLP1 in saline on the day of birth and challenged 7 wk later with PLP1 peptide in CFA develop an organ-specific neonatal immunity that confers resistance against experimental allergic encephalomyelitis. The T cell responses in these animals comprise Th2 cells in the lymph node and anergic Th1 lymphocytes in the spleen. Intriguingly, the anergic splenic T cells, although nonproliferative and unable to produce IFN-gamma or IL-4, secrete significant amounts of IL-2. In this work, studies were performed to determine whether costimulation through B7 molecules plays any role in the unusual form of splenic Th1 anergy. The results show that engagement of either B7.1 or B7.2 with anti-B7 Abs during induction of EAE in adult mice that were neonatally tolerized with Ig-PLP1 restores and exacerbates disease severity. At the cellular level, the anergic splenic T cells regain the ability to proliferate and produce IFN-gamma when stimulated with Ag in the presence of either anti-B7.1 or anti-B7.2 Ab. However, such restoration was abolished when both B7.1 and B7.2 molecules were engaged simultaneously, indicating that costimulation is necessary for reactivation. Surprisingly, both anti-B7.1 and anti-B7.2 Abs triggered splenic dendritic cells to produce IL-12, a key cytokine required for restoration of the anergic T cells. Thus, recovery from neonatally induced T cell anergy requires B7 molecules to serve double functions, namely, costimulation and induction of cytokine production by APCs.