T follicular helper (Tfh) cells are a subset of T cells carrying the CD4 antigen; they are important in supporting plasma cell and germinal centre responses^,. The initial induction of Tfh cell properties occurs within the first few days after activation by antigen recognition on dendritic cells, although how dendritic cells promote this cell-fate decision is not fully understood^,. Moreover, although Tfh cells are uniquely defined by expression of the follicle-homing receptor CXCR5 (refs , ), the guidance receptor promoting the earlier localization of activated T cells at the interface of the B-cell follicle and T zone has been unclear^,,. Here we show that the G-protein-coupled receptor EBI2 (GPR183) and its ligand 7α,25-dihydroxycholesterol mediate positioning of activated CD4 T cells at the interface of the follicle and T zone. In this location they interact with activated dendritic cells and are exposed to Tfh-cell-promoting inducible co-stimulator (ICOS) ligand. Interleukin-2 (IL-2) is a cytokine that has multiple influences on T-cell fate, including negative regulation of Tfh cell differentiation^,,,,. We demonstrate that activated dendritic cells in the outer T zone further augment Tfh cell differentiation by producing membrane and soluble forms of CD25, the IL-2 receptor α-chain, and quenching T-cell-derived IL-2. Mice lacking EBI2 in T cells or CD25 in dendritic cells have reduced Tfh cells and mount defective T-cell-dependent plasma cell and germinal centre responses. These findings demonstrate that distinct niches within the lymphoid organ T zone support distinct cell fate decisions, and they establish a function for dendritic-cell-derived CD25 in controlling IL-2 availability and T-cell differentiation.