A newly recognized link between the complement system and adaptive immunity is that decay accelerating factor (DAF), a cell surface C3/C5 convertase regulator, exerts control over T cell responses. Extending these results, we show that cultures of Marilyn TCR-transgenic T cells stimulated with DAF-deficient (Daf1(-/-)) APCs produce significantly more IL-12, C5a, and IFN-gamma compared with cultures containing wild-type APCs. DAF-regulated IL-12 production and subsequent T cell differentiation into IFN-gamma-producing effectors was prevented by the deficiency of either C3 or C5a receptor (C5aR) in the APC, demonstrating a link between DAF, local complement activation, IL-12, and T cell-produced IFN-gamma. Bone marrow chimera experiments verified that bone marrow cell-expressed C5aR is required for optimal differentiation into IFN-gamma-producing effector T cells. Overall, our results indicate that APC-expressed DAF regulates local production/activation of C5a following cognate T cell/APC interactions. Through binding to its receptor on APCs the C5a up-regulates IL-12 production, this in turn, contributes to directing T cell differentiation toward an IFN-gamma-producing phenotype. The findings have implications for design of therapies aimed at altering pathologic T cell immunity.