The PD-1/B7-H1 pathway regulates immune responses and maintains homeostasis. Here, we identified a unique expression of B7 homolog 1 (B7-H1) on masticatory mucosae in the oral cavity. B7-H1 was physiologically expressed on the dorsal surface of the tongue, gingiva, and hard palate. Other squamous epithelia and other structures of the epithelia did not express B7-H1 in the steady state. Physiological B7-H1 expression on masticatory mucosae was limited on prickle cells, and its expression on basal keratinocytes (KCs) was strictly regulated. B7-H1 on prickle cells was upregulated by external topical stimuli, but B7-H1 on basal KCs was induced only by internal stimuli via infiltrating cells. The blocking of KC-associated B7-H1 or the lack of programmed cell death-1 (PD-1) on tissue effector CD4+ T cells in mice lacking B7-H1 on immune cells drastically exacerbated the tissue inflammation induced by topical OVA painting as an exogenous antigen, indicating direct interaction with KCs and CD4+ T cells. Trans-coinhibitory signals by KCs may modulate local T-cell/dendritic cell activation, resulting in inhibition of T-cell responses in both peripheral and secondary lymphoid tissues. Careful control of B7-H1 induction in KCs may play a crucial role in the protection from CD4+ T cell-mediated tissue inflammation by exogenous antigens delivered from the mucosal surface.