Therapeutically targeting pathogenic T cells in autoimmune diseases has been challenging. Although LAG-3, an inhibitory checkpoint receptor specifically expressed on activated T cells, is known to bind to major histocompatibility complex class II (MHC class II), we demonstrate that MHC class II interaction alone is insufficient for optimal LAG-3 function. Instead, LAG-3's spatial proximity to T cell receptor (TCR) but not CD4 co-receptor, facilitated by cognate peptide-MHC class II, is crucial in mediating CD4 T cell suppression. Mechanistically, LAG-3 forms condensate with TCR signaling component CD3ε through its intracellular FSAL motif, disrupting CD3ε/lymphocyte-specific protein kinase (Lck) association. To exploit LAG-3's proximity to TCR and maximize LAG-3-dependent T cell suppression, we develop an Fc-attenuated LAG-3/TCR inhibitory bispecific antibody to bypass the requirement of cognate peptide-MHC class II. This approach allows for potent suppression of both CD4 and CD8 T cells and effectively alleviates autoimmune symptoms in mouse models. Our findings reveal an intricate and conditional checkpoint modulatory mechanism and highlight targeting of LAG-3/TCR cis-proximity for T cell-driven autoimmune diseases lacking effective and well-tolerated immunotherapies.