Pathways in the B7:CD28 family of costimulatory molecules regulate T cell activation and tolerance. B7-dependent responses in Cd28(-/-)Ctla4(-/-) T cells together with reports of stimulatory and inhibitory functions for Programmed Death-1 Ligand 1 or 2 molecules (PD-L1 or PD-L2) have suggested additional receptors for these B7 family members. We show that B7-1 and PD-L1 interacted with affinity intermediate to that of B7-1:CD28 and B7-1:CTLA-4. The PD-L1:B7-1 interface overlapped with the B7-1:CTLA-4 and PD-L1:PD-1 (Programmed Death-1) interfaces. T cell activation and cytokine production were inhibited by the interaction of B7-1 with PD-L1. The responses of PD-1-deficient versus PD-1,B7-1 double-deficient T cells to PD-L1 and of CD28,CTLA-4 double-deficient versus CD28,CTLA-4,PD-L1 triple-deficient T cells to B7-1 demonstrated that PD-L1 and B7-1 interact specifically to inhibit T cell activation. Our findings point to a substantial bidirectional inhibitory interaction between B7-1 and PD-L1 and add an additional dimension to immunoregulatory functions of the B7:CD28 family.