The B7 costimulatory molecules govern many aspects of T cell immune responses by interacting with CD28 for costimulation, but also with CTLA-4 for immune suppression. Although blockade of CTLA-4 with Ab in humans undergoing cancer immune therapy has led to some cases of inflammatory bowel disease, spontaneous animal models of colitis that depend upon modulation of B7 interactions have not been previously described. In this study, we demonstrate that mice expressing a soluble B7-2 Ig Fc chimeric protein spontaneously develop colitis that is dependent on CD28-mediated costimulation of CD4(+) T cells. We show that the chimeric protein has mixed agonistic/antagonist properties, and that it acts in part by blocking the cell intrinsic effects on T cell activation of engagement of CTLA-4. Disease occurred in transgenic mice that lack expression of the endogenous B7 molecules (B7 double knock-out mice), because of the relatively weak costimulatory delivered by the chimeric protein. Surprisingly, colitis was more severe in this context, which was associated with the decreased number of Foxp3(+) regulatory T cells in transgenic B7 double knock-out mice. This model provides an important tool for examining how B7 molecules and their effects on CTLA-4 modulate T cell function and the development of inflammatory diseases.