CTLA-4 is a critical gatekeeper of T-cell activation and immunological tolerance and has been implicated in patients with a variety of autoimmune diseases through genetic association. Since T cells from patients with the autoimmune disease systemic lupus erythematosus (SLE) display a characteristic hyperactive phenotype, we investigated the function of CTLA-4 in SLE. Our results reveal increased CTLA-4 expression in FOXP3(-) responder T cells from patients with SLE compared with other autoimmune rheumatic diseases and healthy controls. However, CTLA-4 was unable to regulate T-cell proliferation, lipid microdomain formation and phosphorylation of TCR-zeta following CD3/CD28 co-stimulation, in contrast to healthy T cells. Although lupus T cells responded in vitro to CD3/CD28 co-stimulation, there was no parallel increase in CTLA-4 expression, which would normally provide a break on T-cell proliferation. These defects were associated with exclusion of CTLA-4 from lipid microdomains providing an anatomical basis for its loss of function. Collectively our data identify CTLA-4 dysfunction as a potential cause for abnormal T-cell activation in patients with SLE, which could be targeted for therapy.