CTLA-4 plays an important role in the down-regulation of activated T cells and in the establishment of peripheral tolerance. It has been hypothesized that CTLA-4 on the cell surface signals directly into T cells during primary immune responses, resulting in intrinsic T cell down-regulation. It is not known, however, whether CTLA-4 directly inhibits the less intense activating signals received by autoreactive T cells in the periphery. We investigated whether CTLA-4 acts intrinsically upon self-reactive cells in vivo, or whether it inhibits autoreactive cells indirectly, in a non-cell autonomous manner. The adoptive transfer of CTLA-4-deficient splenocytes or Thy 1+ cells into recombinase-activating gene 2-deficient mice resulted in fatal inflammation and tissue destruction similar to that seen in CTLA-4-deficient mice. When an equivalent number of splenocytes or Thy 1+ cells from wild-type animals was transferred with the CTLA-4-deficient cells, recipient mice survived indefinitely. Since CTLA-4 was absent in the T cells responsible for the inflammatory phenotype, the down-regulation of these autoreactive cells must have been facilitated indirectly by wild-type Thy 1+ cells. In addition, a rapid reduction in the ratio of CTLA-4-deficient to wild-type cells was observed. We propose two possible indirect mechanisms by which CTLA-4 may function in the establishment and maintenance of peripheral tolerance.