Ly-6 proteins appear to serve cell adhesion and cell signaling function, but the precise role of Ly-6A.2 in CD4+ T lymphocytes is still unclear. Overexpression of Ly-6A.2 in T lymphocytes has allowed us to analyze the influence of elevated Ly-6A.2 expression on T cell function. In this study we report reduced proliferation of CD4+ T cells overexpressing Ly-6A.2 in response to a peptide Ag. Moreover, the Ly-6A.2-overexpressing CD4+ cells generated elevated levels of IL-4, a key factor that propels the differentiation of naive CD4+ T cells into Th2 subset. The hyporesponsiveness of Ly-6A.2 transgenic CD4+ T cells is dependent on the interaction of Ly-6A.2 T cells with the APCs and can be reversed by blocking the interaction between Ly-6A.2 and a recently reported candidate ligand. Overexpression of Ly-6A.2 in CD4+ T cells reduced their Ca2+ responses to TCR stimulation, therefore suggesting effects of Ly-6A.2 signaling on membrane proximal activation events. In contrast to the observed Ag-specific hyporesponsiveness, the Ly-6A.2 transgenic CD4+ T cells produced IL-4 independent of the interactions between Ly-6A.2 and the candidate Ly-6A.2 ligand. Our results suggest that 1) interaction of Ly-6A.2 with a candidate ligand regulates clonal expansion of CD4+ Th cells in response to an Ag (these results also provide further functional evidence for presence of Ly-6A.2 ligand on APC); and 2) Ly-6A.2 expression on CD4+ T cells promotes production of IL-4, a Th2 differentiation factor.