Blockade of the B7: CD28 costimulatory pathway has emerged as a promising therapy to prevent allograft rejection. However, this pathway has also been demonstrated to be important for the generation and maintenance of regulatory T cells. In this study, we investigated the role of the B7: CD28 pathway in the 'bm12 into B6' MHC class II-mismatched vascularized cardiac transplant model of chronic rejection. Allograft rejection was remarkably accelerated in B6 background B7DKO and CD28KO recipients compared with B6 wild-type (WT) recipients. Allograft rejection was associated with a significantly enhanced Th1/Th2 alloreactivity and marked reduction in the ratio of regulatory T cells to CD4(+) effector/memory cells. We noted that administration of anti-B7-1 and anti-B7-2 mAb prior to transplantation also accelerated allograft rejection. Furthermore, depleting CD25(+) cells in B6 WT recipients of bm12 hearts prior to transplant also precipitated rejection at a similar rate. Neither B7/CD28 deficiency nor CD25 depletion affected graft survival in single MHC class I-mismatched (bm1 into B6) recipients. This study highlights the paradoxical functions of B7: CD28 costimulation in a MHC class II-mismatched model, in which the B7: CD28 pathway is demonstrated to be important in preventing rejection through the generation and maintenance of Tregs.