The role of costimulation in the activation of TCR-gamma delta cells in normal mice and mice transgenic (tg) for a TCR-gamma delta receptor was investigated. Activation of TCR-gamma delta cells required two signals. One signal was mediated by TCR occupancy, whereas a second signal was provided by accessory cells. The importance of the CD28/B7 interaction in the delivery of the second signal was demonstrated in multiple ways. First, addition of a soluble fusion protein homolog of CD28, CTLA4Ig, significantly inhibited the activation of G8 tg splenic TCR-gamma delta lymphocytes and intestinal epithelial TCR-gamma delta lymphocytes by Ag-bearing lymphocytes during primary stimulation. Similarly, both proliferation and IFN-gamma production were inhibited by addition of CTLA4Ig to secondary antigenic stimulation of G8 tg TCR-gamma delta cells. Second, an Ag-bearing thymoma, EL-4, was only able to stimulate expanded G8 tg TCR-gamma delta cells when the thymoma expressed B7. This stimulation was blocked by both CTLA4Ig and anti-B7 antibody. Third, antibodies to CD28 were able to mimic the costimulatory affect of APC. TCR-gamma delta cells cultured with either Ag-bearing fixed stimulator cells or submitogenic concentrations of immobilized anti-pan TCR-gamma delta mAb proliferated only in the presence of anti-CD28 mAb. Finally, G8 tg cells produced IL-2 only in the presence of APC costimulation or anti-CD28 antibodies, and the addition of exogenous rIL-2 overcame the need for costimulation. Thus, autocrine IL-2 production is one of the major consequences of TCR-gamma delta cell costimulation. Together these data demonstrate that costimulation is necessary for the activation of TCR-gamma delta cells and can occur through CD28 interaction.