CTL-associated antigen 4 (CTLA-4) engagement negatively regulates T cell activation and function and promotes immune tolerance. However, it has been difficult to explore the biology of selective engagement of CTLA-4 in vivo because CTLA-4 shares its ligands, B7-1 and B7-2, with CD28. To address this issue, we developed a Tg mouse expressing a single-chain, membrane-bound anti–CTLA-4 Ab (scFv) on B cells. B and T cells developed normally and exhibited normal phenotype in the steady state and after activation in these mice. However, B cells from scFv Tg+ mice (scαCTLA4+) prevented T cell proliferation and cytokine production in mixed lymphocyte reactions. Additionally, mice treated with scαCTLA4+ B cells had decreased T cell–dependent B cell Ab production and class switching in vivo after antigen challenge. Furthermore, expression of this CTLA-4 agonist protected NOD mice from spontaneous autoimmune diabetes. Finally, this disease prevention occurred in Treg-deficient NOD.B7-1/B7-2 double-knockout mice, suggesting that the effect of the CTLA-4 agonist directly attenuates autoreactive T cell activation, not Treg activation. Together, results from this study demonstrate that selective ligation of CTLA-4 attenuates in vivo T cell responses, prevents development of autoimmunity, and represents a novel immunotherapeutic approach for the induction and maintenance of peripheral tolerance.