PD-1 is an immunoinhibitory receptor that belongs to the CD28/CTLA-4 family. B7-H1 (PD-L1) and B7-DC (PD-L2), which belong to the B7 family, have been identified as ligands for PD-1. Paradoxically, it has been reported that both B7-H1 and B7-DC costimulate or inhibit T cell proliferation and cytokine production. To determine the role of B7-H1 and B7-DC in T cell-APC interactions, we examined the contribution of B7-H1 and B7-DC to CD4+ T cell activation by B cells, dendritic cells, and macrophages using anti-B7-H1, anti-B7-DC, and anti-PD-1 blocking mAbs. Anti-B7-H1 mAb and its Fab markedly inhibited the proliferation of anti-CD3-stimulated naive CD4+ T cells, but enhanced IL-2 and IFN-γ production in the presence of macrophages. The inhibition of T cell proliferation by anti-B7-H1 mAb was abolished by neutralizing anti-IFN-γ mAb. Coculture of CD4+ T cells and macrophages from IFN-γ-deficient or wild-type mice showed that CD4+ T cell-derived IFN-γ was mainly responsible for the inhibition of CD4+ T cell proliferation. Anti-B7-H1 mAb induced IFN-γ-mediated production of NO by macrophages, and inducible NO synthase inhibitors abrogated the inhibition of CD4+ T cell proliferation by anti-B7-H1 mAb. These results indicated that the inhibition of T cell proliferation by anti-B7-H1 mAb was due to enhanced IFN-γ production, which augmented NO production by macrophages, suggesting a critical role for B7-H1 on macrophages in regulating IFN-γ production by naive CD4+ T cells and, hence, NO production by macrophages.