T cell activation is regulated by the innate immune system through positive and negative costimulatory molecules. B7-H3 is a novel B7-like molecule with a putative receptor on activated T cells. Human B7-H3 was first described as a positive costimulator, most potently inducing IFN-γ production and cellular immunity. In this study we examined the expression and function of mouse B7-H3. B7-H3 is mostly expressed on professional APCs; its expression on dendritic cells appears to be up-regulated by LPS. In contrast to human B7-H3, we found that mouse B7-H3 protein inhibited T cell activation and effector cytokine production. An antagonistic mAb to B7-H3 enhanced T cell proliferation in vitro and led to exacerbated experimental autoimmune encephalomyelitis in vivo. Therefore, mouse B7-H3 serves as a negative regulator of T cell activation and function.