CD26 is associated with T cell signal transduction processes as a costimulatory molecule, and CD26+ T cells have been suggested to be involved in the pathophysiology of diverse autoimmune diseases. Although the cellular and molecular mechanisms involved in CD26-mediated T cell activation have been extensively evaluated by our group and others, potential negative feedback mechanisms to regulate CD26-mediated activation still remain to be elucidated. In the present study, we examine the expression of inhibitory molecules induced via CD26-mediated costimulation. We show that coengagement of CD3 and CD26 induces preferential production of IL-10 in human CD4+ T cells, mediated through NFAT and Raf-MEK-ERK pathways. A high level of early growth response 2 (EGR2) is also induced following CD26 costimulation, possibly via NFAT and AP-1–mediated signaling, and knockdown of EGR2 leads to decreased IL-10 production. Furthermore, CD3/CD26-stimulated CD4+ T cells clearly suppress proliferative activity and effector cytokine production of bystander T cells in an IL-10–dependent manner. Taken together, our data suggest that robust CD26 costimulatory signaling induces preferential expression of EGR2 and IL-10 as a potential mechanism for regulating CD26-mediated activation.