Adaptive immunity requires signals from both the TCR and the costimulatory molecule CD28. These receptors activate multiple signaling pathways, including the cyclin-dependent kinase (CDK) cascade, and antigenic signals in the absence of costimulation result in a tolerant state that is enforced by the CDK inhibitory protein p27kip1. We find that CDK2, the major target of p27kip1, is highly active in T cells that infiltrate and reject cardiac allografts. We used mice genetically deficient for CDK2 to determine whether CDK2 is required for T cell alloimmunity. Blockade of CD28 costimulation alone was unable to inhibit the rejection of cardiac allografts by wild-type recipients. However, targeting this pathway in CDK2-deficient recipients led to long-term allograft survival. CDK2-deficient CD4(+) T cells proliferated normally in response to stimulation in vitro and in vivo, however, genetic, short hairpin RNA, or small molecule-mediated antagonism of CDK2 resulted in decreased production of IL-2 and IFN-γ. In addition, surviving grafts from CDK2-deficient recipients showed increased infiltration of Foxp3(+) regulatory T cells (Treg), and Treg from CDK2-deficient mice exhibited increased suppressive activity in vitro and in an in vivo model of inflammatory bowel disease. These data suggest that p27kip1 promotes peripheral tolerance through its ability to inhibit CDK2, which otherwise acts to promote conventional T cell differentiation and restrict Treg function.