Induction of peripheral T cell tolerance is mediated by bone marrow-derived dendritic cells that cross-present self-antigen to self-reactive T cells. The current model for peripheral CD8(+) T cell tolerance is that TCR engagement by self-antigen in the absence of costimulation results in abortive activation without development of effector function. Here we demonstrate in vivo that high-dose self-antigen ("signal 1") can compensate for lack of costimulation ("signal 2"), leading to full activation of and development of effector function by self-reactive T cells. In the setting of low-dose self-antigen, acquisition of effector function by self-reactive T cells is dependent on costimulation via CD40 ligation in vivo. However, gain of effector function in either setting does not prevent eventual tolerance of self-reactive CD8(+) T cells. These results suggest that the mechanisms for peripheral CD8(+) T cell tolerance are more complex than the proposed "signal 1 in the absence of signal 2" hypothesis. Further exploration of these mechanisms will have direct impact on the design of effective immunotherapy for autoimmune diseases, chronic infections and cancers.