Engagement of the CD3/T cell antigen receptor complex on small, resting T cells is insufficient to trigger cell-mediated cytotoxicity or to induce a proliferative response. In the present study, we have used genetic transfection to demonstrate that interaction of the B7-BB1 B cell activation antigen with the CD28 T cell differentiation antigen costimulates cell-mediated cytotoxicity and proliferation initiated by either anti-CD2 or anti-CD3 monoclonal antibody (mAb). Moreover, a B7-negative Burkitt's lymphoma cell line that fails to stimulate an allogeneic mixed lymphocyte response is rendered a potent stimulator after transfection with B7. The mixed leukocyte reaction proliferative response against the B7 transfectant is inhibited by either anti-CD28 or B7 mAb. We also demonstrate that freshly isolated small, resting human T cells can mediate anti-CD3 or anti-CD2 mAb-redirected cytotoxicity against a murine Fc receptor-bearing mastocytoma transfected with human B7. These preexisting cytotoxic T lymphocytes in peripheral blood are present in both the CD4 and CD8 subsets, but are preferentially within the CD45RO+ "memory" population. While small, resting T cells apparently require costimulation by CD28/B7 interactions, this requirement is lost after T cell activation. Anti-CD3 initiates a cytotoxic response mediated by in vitro cultured T cell clones in the absence of B7 ligand. The existence of functional cytolytic T cells in the small, resting T cell population may be advantageous in facilitating rapid responses to immune challenge.