The critical role of CTLA-4 in inhibiting Ag-driven T cell responses upon engagement with its ligands, B7-1 and B7-2 and its importance for peripheral T cell tolerance and T cell homeostasis has been studied intensively. The CTLA-4 splice variant ligand-independent (li)-CTLA-4 is expressed in naive and activated T cells and can actively alter T cell signaling despite its lack of a B7 binding domain. To study the effect of li-CTLA-4 in regulating T cell responses in the context of autoimmunity, we engineered a B6.CTLA-4 (floxed-Exon2)-BAC-transgene, resulting in selective expression of li-CTLA-4 upon Cre-mediated deletion of Exon 2. Introducing the B6.BAC into the NOD background, which is genetically deficient for li-CTLA-4, restores mRNA levels of li-CTLA-4 to those observed in C57BL/6 mice. Furthermore, re-expressing this ligand nonbinding isoform in NOD mice reduced IFN-γ production in T effector cells accompanied by a significant decrease in insulitis and type 1 diabetes frequency. However, selective expression of li-CTLA-4 could not fully rescue the CTLA-4 knockout disease phenotype when bred onto NOD.BDC2.5.CTLA-4 knockout background because of the requirement of the full-length, B7-binding CTLA-4 molecule on T effector cells. Thus, the li-CTLA-4 form, when expressed at physiologic levels in the CTLA-4-sufficient NOD background can suppress autoimmunity; however, the functionality of the li-CTLA-4 isoform depends on the presence of the full-length molecule to alter effector T cell signaling.