Receptor-ligand interactions between APCs and T cells determine whether stimulation of the latter leads to activation or inhibition. Previously, we showed that dendritic cell-associated heparin sulfate proteoglycan-dependent integrin ligand (DC-HIL) on APC can inhibit T cell activation by binding an unknown ligand expressed on activated T cells. Because DC-HIL binds heparin/heparan sulfate and heparin blocks the inhibitory function of DC-HIL, we hypothesized that a heparin/heparan sulfate proteoglycan on activated T cells is the relevant ligand. Screening assays revealed that syndecan-4 (SD-4) is the sole heparan sulfate proteoglycan immunoprecipitated by DC-HIL from extracts of activated T cells and that blocking SD-4 abrogates binding of DC-HIL to activated T cells. Moreover, cell-bound SD-4 ligated by DC-HIL or cross-linked by anti-SD-4 Ab attenuated anti-CD3 responses, whereas knocked-down SD-4 expression led to enhanced T cell response to APC. Blockade of endogenous SD-4 using specific Ab or soluble SD-4 receptor led to augmented T cell reactions to syngeneic and allogeneic stimulation in vitro and exacerbated contact hypersensitivity responses in vivo. We conclude that SD-4 is the T cell ligand through which DC-HIL mediates its negative coregulatory function.