Cytotoxic T lymphocyte antigen 4 (CTLA-4) is a T cell costimulation receptor that delivers inhibitory signals upon activation. Although the tyrosine-based motif (¹⁶⁵YVKM) within its cytoplasmic tail has been shown to associate in vitro with Src homology 2 domain–containing tyrosine phosphatase (SHP-2) and phosphatidylinositol 3 kinase upon phosphorylation, the mechanism of negative signaling remains unclear. Here, we report a new mechanism of negative signaling based on the analysis of murine T cell clones transfected with various mutants of CTLA-4. Upon T cell activation by cross-linking with anti-CD3 and anti-CD28 antibodies, CTLA-4 engagement inhibited both proliferation and interleukin 2 production in tyrosine mutants as well as in wild-type CTLA-4 transfectants. Furthermore, the mutant CTLA-4 lacking most of the cytoplasmic region strongly suppressed interleukin 2 production as well. These data suggest that negative signals by CTLA-4 could be mediated through the membrane-proximal region of CTLA-4 but not through the YVKM motif and that the association of CTLA-4 with SHP-2 is not required for CTLA-4–mediated suppression of T cell activation.