CTLA-4 is an inhibitory molecule that regulates T cell expansion and differentiation. CTLA-4 binding to B7-1/B7-2 is believed to be crucial for its inhibitory signal both by competing for CD28 binding to the same ligands and aggregating CTLA-4 to deliver negative signals. In this study, we demonstrate that B7 binding is not essential for CTLA-4 activity. CTLA-4 knockout T cells are hyperresponsive compared with wild-type T cells in B7-free settings. Expression of a B7-nonbinding CTLA-4 mutant inhibited T cell proliferation, cytokine production, and TCR-mediated ERK activation in otherwise CTLA-4-deficient T cells. Finally, transgenic expression of the ligand-nonbinding CTLA-4 mutant delayed the lethal lymphoproliferation observed in CTLA-4-deficient mice. These results suggest that ligand binding is not essential for the CTLA-4 function and supports an essential role for CTLA-4 signaling during T cell activation.