The requirement for CTLA-4 during the induction of peripheral T cell tolerance in vivo was investigated using naive TCR transgenic T cells lacking CTLA-4. CTLA-4(-/-) T cells are resistant to tolerance induction, as demonstrated by their proliferative responses, IL-2 production, and progression into the cell cycle. Following exposure to a tolerogenic stimulus in vivo and restimulation in vitro, wild-type T cells are blocked at the late G1 to S restriction point of the cell cycle. In contrast, CTLA-4(-/-) T cells enter into the S phase of the cell cycle, as shown by downregulation of p27(kip1), elevated cdk2 kinase activity, and Rb hyperphosphorylation. Thus, CTLA-4 has an essential role in determining the outcome of T cell encounter with a tolerogenic stimulus.