T cell activation and tolerance are tightly regulated to assure effective elimination of infectious pathogens while maintaining tolerance to self-tissues. T cell immunity vs tolerance decision is, on one hand, determined by the extracellular signals delivered by the innate immune system. On the other hand, T cells must react through intracellular signal transduction and gene transcription mechanisms to allow them respond appropriately to these signals. Costimulatory molecules are important in regulation of T cell clonal activation and function. Recently, we found that antigen-specific T cells, only when activated in the absence of both CD28 and ICOS pathways, were completely impaired in effector function in vitro and in vivo. These tolerant T cells significantly upregulated the expression of Grail, an E3 ubiquitin ligase previously implicated in T cell anergy. Blocking inhibitory costimulation or addition of exogenous IL-2 bypassed the requirement of CD28 and ICOS costimulation in T cell activation and restored T cell function, associated with downregulation of Grail expression. These studies indicate Grail as a signature of T cell tolerance. To test the function of Grail in T cell tolerance, we analyzed a Grail knockout mouse. Grail-deficient T cells were found to exhibit defects in activation and differentiation. Our central hypothesis for the current study is that Grail molecule critically regulates T cell tolerance and function. We will first analyze the regulation of Grail in T cell tolerance. Secondly, we will analyze the function of Grail in TH cell differentiation. We will analyze the function of Grail in TH cell differentiation in vitro and in vivo. These proposed studies will greatly advance our knowledge on Grail function in T cells and give an important insight into T cell signal transduction and gene regulation programs in immune responses.