T cells require at least two signals for activation and clonal expansion. The first signal conferring specificity is initiated by interaction of the T cell receptor with antigenic peptides in the context of MHC molecules. The second, costimulatory signal can be provided by cell surface molecules on APCs such as B7-1 (CD80) and B7-2 (CD86), which interact with their counter-receptors on T cells. The absence of costimulatory signals presents one possible mechanism for tumor cells to escape immune surveillance. In experimental models transfection of B7 genes into tumor cells can result in T cell-dependent tumor rejection. We have developed a novel approach to direct the costimulatory B7-2 molecule to the surface of target cells. Our approach is based on a chimeric fusion protein that consists of the extracellular domain of human B7-2 fused to a single-chain Ab domain (scFv) specific for the ErbB2 protein, a type I growth factor receptor overexpressed in a high percentage of human adenocarcinomas. This B7-2(225)-scFv(FRP5) molecule expressed in the yeast Pichia pastoris and purified from culture supernatants is functionally active and binds to B7 counter-receptors and to ErbB2. B7-2(225)-scFv(FRP5) localizes specifically to the surface of ErbB2-expressing target cells, thereby providing a costimulatory signal that results in enhanced proliferation of syngeneic T cells. Our results suggest that effective tumor vaccines for cancer immunotherapy could be created by targeting such chimeric ligands to the surface of tumor cells.