We have previously shown that the murine B7 (mB7) molecule, when expressed in Chinese hamster ovary cells in stable fashion, can costimulate with anti-CD3 mAb or Con A to induce T cell activation. We have now derived, by gene transfection, Chinese hamster ovary cell lines that express the I-Ad molecule, either alone or in context with mB7. We have analyzed these transfectants for their capacity to present Ag to murine CD4+ T lymphocytes. I-Ad/mB7-double transfectants were able to stimulate mixed lymphocyte reactions and to present peptide Ag to specific T cells. Chinese hamster ovary cells that expressed only the I-Ad molecule were not able to stimulate T cell proliferation in these systems. Thus, the mB7 protein is a sufficient costimulatory molecule for the physiologic, Ag-dependent/MHC-restricted activation of murine CD4+ T cells. Stimulation of T cell bulk cultures resulted predominantly in the production of IL-2 and not of IL-4. The costimulatory activity of mB7 is not, however, restricted to the IL-2-secreting subset. We have identified one IL-4-secreting T cell clone, CDC35, which is responsive to mB7 triggering. Finally, we present experiments that suggest that mB7 and peptide/MHC complexes need to be expressed on the same cell for optimal induction of T cell activation.