The inducible costimulatory (ICOS) molecule is expressed by activated T cells and has homology to CD28 and CD152. ICOS binds B7h, a molecule expressed by APC with homology to CD80 and CD86. To investigate regulation of ICOS expression and its role in Th responses we developed anti-mouse ICOS mAbs and ICOS-Ig fusion protein. Little ICOS is expressed by freshly isolated mouse T cells, but ICOS is rapidly up-regulated on most CD4(+) and CD8(+) T cells following stimulation of the TCR. Strikingly, ICOS up-regulation is significantly reduced in the absence of CD80 and CD86 and can be restored by CD28 stimulation, suggesting that CD28-CD80/CD86 interactions may optimize ICOS expression. Interestingly, TCR-transgenic T cells differentiated into Th2 expressed significantly more ICOS than cells differentiated into Th1. We used two methods to investigate the role of ICOS in activation of CD4(+) T cells. First, CD4(+) cells were stimulated with beads coated with anti-CD3 and either B7h-Ig fusion protein or control Ig fusion protein. ICOS stimulation enhanced proliferation of CD4(+) cells and production of IFN-gamma, IL-4, and IL-10, but not IL-2. Second, TCR-transgenic CD4(+) T cells were stimulated with peptide and APC in the presence of ICOS-Ig or control Ig. When the ICOS:B7h interaction was blocked by ICOS-Ig, CD4(+) T cells produced more IFN-gamma and less IL-4 and IL-10 than CD4(+) cells differentiated with control Ig. These results demonstrate that ICOS stimulation is important in T cell activation and that ICOS may have a particularly important role in development of Th2 cells.