The T-BAM/CD40-L molecule on CD4+ T cells interacts with B cell CD40 molecules to deliver contact-dependent signals that drive B cell activation and Ig secretion. Cell surface T-BAM/CD40-L expression is transient and may be closely regulated in order to limit the activation and clonal selection of noncognate B cells. We demonstrate that B cells, but not non-B cells, rapidly and specifically down-modulate surface T-BAM/CD40-L expression in a contact-dependent and temperature-sensitive manner that renders T cells unable to activate resting bystander B cells. Because the ability to down-modulate T-BAM/CD40-L correlated with CD40 expression, the role of CD40 molecules in down-modulating its ligand was directly assessed. Anti-CD40 mAb, but not control mAb, block B cell-induced T-BAM/CD40-L down-modulation. Furthermore, CD40+ nonlymphoid transfectants specifically down-modulate surface T-BAM/CD40-L expression. B cells induce T-BAM/CD40-L internalization into cytoplasmic compartments in a process that is inhibited by cytochalasin B. Pretreatment of activated T cells with lysosomotropic agents does not affect CD40-induced down-modulation of surface T-BAM/CD40-L but results in a marked accumulation of T-BAM/CD40-L in cytoplasmic vesicles. Together, these studies strongly suggest that CD40 induced T-BAM/CD40-L down-modulation occurs, in part, by receptor-mediated endocytosis followed by lysosomal degradation and may represent a mechanism to regulate CD4+ T cell helper effector functions.