A cDNA encoding the T cell activation Ag CD26 was isolated from human PHA-activated T cells by using an expression cloning method. The nucleotide sequence obtained predicts a protein of 766 amino acids of type II membrane topology, with six amino acids in the cytoplasmic region. The predicted amino acid sequence of the Ag was 85% homologous to that of the dipeptidyl peptidase IV enzyme isolated from rat liver. Derivatives of the human leukemic T cell line Jurkat transfected with a CD26 expression plasmid were established. Characterization of the CD26 Ag expressed by the transfected Jurkat cells revealed that the Ag could be immunoprecipitated as a 110-kDa molecule similar to that found on peripheral blood T cells and that the Ag had dipeptidyl peptidase IV activity. Functional analysis of these Jurkat transfectants showed that cross-linking of the CD26 and CD3 Ag with their respective antibodies resulted in enhanced intracellular calcium mobilization and IL-2 production. These results provide direct evidence that the CD26 Ag plays a role in T cell activation.