We investigated the in vivo function of the B7 family member B7-H3 (also known as B7RP-2) by gene targeting. B7-H3 inhibited T cell proliferation mediated by antibody to T cell receptor or allogeneic antigen-presenting cells. B7-H3-deficient mice developed more severe airway inflammation than did wild-type mice in conditions in which T helper cells differentiated toward type 1 (T_H1) rather than type 2 (T_H2). B7-H3 expression was consistently enhanced by interferon-γ but suppressed by interleukin 4 in dendritic cells. B7-H3-deficient mice developed experimental autoimmune encephalomyelitis several days earlier than their wild-type littermates, and accumulated higher concentrations of autoantibodies to DNA. Thus, B7-H3 is a negative regulator that preferentially affects T_H1 responses.