The kinetics of cytotoxic T lymphocyte antigen 4 (CTLA-4) expression on T cells responding to Cryptococcus neoformans and its role in regulating the T-cell response were examined. Using peripheral blood mononuclear cells stimulated with encapsulated or acapsular C. neoformans we showed that (i) the encapsulated strain augmented CTLA-4 expression on the T-cell surface while the acapsular strain was a weaker modulator, (ii) CTLA-4 molecules were rapidly up-regulated after the addition of encapsulated C. neoformans, (iii) CTLA-4 was up-regulated predominantly in CD4⁺ T cells responding to C. neoformans, and (iv) blockage of CTLA-4 with (Fab')₂ of monoclonal antibody to CTLA-4 induced T-cell proliferation that paralleled the enhancement of interleukin-2 and gamma interferon production. These results suggest that capsular material, the major virulence factor of C. neoformans, promotes synthesis and expression of CTLA-4 molecules predominantly in CD4⁺ T cells. CTLA-4-mediated deactivation is due not to lack of costimulation but to specific recognition of CTLA-4 for B7 molecules. This appears to be a new mechanism by which C. neoformans may elude the host immune response.