Soluble ligands specific for cell surface molecules involved in APC-T cell interactions can signal cells and modulate immune responses. Recently, we reported that LFA3TIP, a fusion protein comprised of the first LFA-3 extracellular domain fused to the hinge, CH2, and CH3 regions of a human IgG1 inhibits proliferation of human T cells in vitro. We report herein the cell-based mechanism(s) of LFA3TIP in inhibition by studying the effects of structurally altered LFA3-Ig fusion proteins on proliferation of human PBL in vitro and on responses of mice transgenic for human CD2. We show that LFA3TIP inhibition requires expression of both the LFA-3 and CH2 domains of the fusion protein that bind CD2 and Fc gamma RI or Fc gamma RIII, respectively. LFA3TIP forms an intracellular Fc gamma R/CD2 bridge and directs cytolysis of CD2+ cells by freshly drawn human PBL in vitro as well as the non-C-mediated depletion of peripheral T cells of human CD2 transgenic mice. The cell-based mechanism(s) of LFA3TIP inhibition are discussed.