The molecular basis of CD28-dependent costimulation of T cells is poorly understood. Bcl-xgamma is a member of the Bcl-x family whose expression is restricted to activated T cells and requires CD28-dependent ligation for full expression. We report that Bcl-xgamma-deficient (Bcl-xgamma-/-) T cells display defective proliferative and cytokine responses to CD28-dependent costimulatory signals, impaired memory responses to proteolipid protein peptide (PLP), and do not develop PLP-induced experimental autoimmune encephalomyelitis (EAE). In contrast, enforced expression of Bcl-xgamma largely replaces the requirement for B7-dependent ligation of CD28. These findings identify the Bcl-xgamma cytosolic protein as an essential downstream link in the CD28-dependent signaling pathway that underlies T cell costimulation.