Activation of naive T cells occurs when two signals are received. The first signal is received through the T cell antigen receptor (TCR), and a second costimulatory signal is primarily provided by CD28. We have recently identified a novel adaptor molecule, ALX, which is expressed exclusively in hematopoietic cells. ALX contains several sites for potential protein-protein interaction, including an Src homology 2 (SH2) domain, four PXXP polyproline sequences, and two likely sites of tyrosine phosphorylation. Overexpression of ALX inhibits the transcriptional activation of the interleukin 2 promoter during T cell activation, specifically affecting CD28-mediated activation of the RE/AP element of the interleukin 2 promoter. To understand how ALX functions downstream of CD28, we generated a panel of site-directed mutants as well as truncations in which potential protein-binding sites were mutated or absent. We found that the ALX SH2 domain is both necessary and sufficient to mediate inhibition of RE/AP activation. Mutation of the SH2 domain did not affect ALX expression, relative localization in the cytoplasm and nucleus, phosphorylation, or a mobility shift in response to TCR signaling alone. However, an activation-induced mobility shift triggered by CD28 was reduced in the ALX SH2 domain mutant. In addition, the isolated ALX SH2 domain was found to associate with a phosphoprotein from Jurkat T cells on TCR/CD28 stimulation. Therefore, the ALX SH2 domain plays a critical role in ALX function downstream of CD28.The activation of T cells is critical to the generation of an immune response. Minimally, two signals are required to activate naive T cells into effector T cells, an antigen-specific signal through the T cell receptor (TCR) 1 and a second antigen-independent "costimulatory" signal, which is primarily provided by CD28 (reviewed in Ref. 1). A critical step in T cell activation is the induction of the interleukin 2 (IL-2) gene, which occurs through both a transcriptional up-regulation of its promoter as well as increased stability of its mRNA (2, 3). The biochemical events immediately downstream of TCR engagement are well characterized, initiating with activation of Src family kinases Lck and Fyn, phosphorylation of tyrosines within immunoreceptor tyrosine activation motifs within CD3, and recruitment of Syk family kinases to these motifs. The subsequent activation of these kinases leads to the recruitment of many signaling proteins to the site of T cell/antigen presenting cell interaction (reviewed in Ref. 4). The biochemical events downstream of CD28 and how they synergize with TCR signals to result in T cell activation, including IL-2 production, are much less well understood. In particular, the RE/AP composite element is the major site of CD28-mediated transcriptional activation within the IL-2 promoter (5, 6). An understanding of the signaling pathways required for RE/AP up-regulation during T cell activation would lead to a better grasp of the biochemical events of costimulation.We have recently identified...