NOD mice spontaneously develop insulin-dependent diabetes around 10-40 wk of age. Numerous immune gene variants contribute to the autoimmune process. However, genes that direct the autoimmune response toward β cells remain ill defined. In this study, we provide evidence that the Icos and Icosl genes contribute to the diabetes process. Protection from diabetes in ICOS(-/-) and ICOSL(-/-) NOD mice was unexpectedly associated with the development of an autoimmune disorder of the neuro-muscular system, characterized by myositis, sensory ganglionitis and, to a reduced extent, inflammatory infiltrates in the CNS. This syndrome was reproduced upon adoptive transfer of CD4(+) and CD8(+) T cells from diseased donors to naïve NOD.scid recipients. Our data further show that protection from diabetes results from defective activation of autoimmune diabetogenic effector T cells in ICOS(-/-) NOD mice, whereas acceleration of diabetes in BDC2.5 ICOS(-/-) NOD mice is induced by a dominant defect in Treg. Taken together, our findings indicate that costimulation signals play a key role in regulating immune tolerance in peripheral tissues and that the ICOS/ICOSL costimulatory pathway influences the balance between Treg and diabetogenic effector T cells.