Autoreactive B lymphocytes that are not culled by central tolerance in the bone marrow frequently enter the peripheral repertoire in a state of functional impairment, termed anergy. These cells are recognized as a liability for autoimmunity, but their contribution to disease is not well understood. Insulin-specific 125Tg B cells support T cell-mediated type 1 diabetes in NOD mice, despite being anergic to B cell mitogens and T cell-dependent immunization. Using this model, the potential of anergic, autoreactive B cells to present Ag and activate T cells was investigated. The data show that 1) insulin is captured and rapidly internalized by 125Tg BCRs, 2) these Ag-exposed B cells are competent to activate both experienced and naive CD4(+) T cells, 3) anergic 125Tg B cells are more efficient than naive B cells at activating T cells when Ag is limiting, and 4) 125Tg B cells are competent to generate low-affinity insulin B chain epitopes necessary for activation of diabetogenic anti-insulin BDC12-4.1 T cells, indicating the pathological relevance of anergic B cells in type 1 diabetes. Thus, phenotypically tolerant B cells that are retained in the repertoire may promote autoimmunity by driving activation and expansion of autoaggressive T cells via Ag presentation.