To assess the role of B7, CTLA4, and CD28 in the pathogenesis of chronic synovitis we analyzed the expression and function of these cell surface molecules in patients with rheumatoid arthritis, osteoarthritis, and psoriatic arthritis, and in normal controls. Immunoperoxidase staining of rheumatoid synovial membranes showed reactivity of 30% of T cells with anti-B7 mAb, in contrast to osteoarthritic and normal synovial membranes, in which no such staining was seen. In addition, rheumatoid synovial fluid T cells were positive by flow cytometric analysis for B7 (mean 20%, range 0 to 96%), as measured by staining with anti-B7 mAb or the CTLA4 Ig fusion protein, whereas no B7 expression was detected on peripheral blood T cells (mean 1%). To analyze the functional importance of B7 expressed on synovial fluid T cells, we used these cells as stimulator cells in primary allogeneic MLC. Purified synovial fluid T cells were far stronger stimulator cells compared with paired peripheral blood T cells and resulted in a fivefold greater increase in allogeneic T cell proliferation. Furthermore, the proliferation induced by purified synovial T cells was markedly inhibited by addition of the CTLA4 Ig fusion protein (77%). Moreover, anti-B7 mAb (37%), anti-CTLA4 mAb (33%), and Fab fragments of anti-CD28 mAb (52%) partially inhibited the primary MLC. The expression of functional B7, together with the increased expression of MHC class II molecules, indicates that synovial T cells may serve as functional APCs and may be capable of autocrine stimulation via the CD28 activation pathway.