T-lymphocyte activation and immune function are regulated by co-stimulatory molecules. CD28, a receptor for B7 gene products, has a chief role in initiating T-cell immune responses. CTLA4, which binds B7 with a higher affinity, is induced after T-cell activation and is involved in downregulating T-cell responses. The inducible co-stimulatory molecule (ICOS), a third member of the CD28/CTLA4 family, is expressed on activated T cells. Its ligand B7H/B7RP-1 is expressed on B cells and in non-immune tissues after injection of lipopolysaccharide into animals. To understand the role of ICOS in T-cell activation and function, we generated and analysed ICOS-deficient mice. Here we show that T-cell activation and proliferation are defective in the absence of ICOS. In addition, ICOS -/- T cells fail to produce interleukin-4 when differentiated in vitro or when primed in vivo. ICOS is required for humoral immune responses after immunization with several antigens. ICOS-/- mice showed greatly enhanced susceptibility to experimental autoimmune encephalomyelitis, indicating that ICOS has a protective role in inflammatory autoimmune diseases.