The B7/CD28:CTLA-4 costimulatory pathway plays a critical role in determining the fate of immune responses (activation vs. down-regulation) and is a highly promising therapeutic target for treating autoimmune diseases. In this review, we highlight the mechanisms by which this costimulatory pathway operates emphasizing the role of the different components in the pathogenesis of relapsing experimental autoimmune encephalomyelitis, a CD4 T cell-mediated autoimmune model of multiple sclerosis. The separate and distinct roles of B7-1, B7-2 and CTLA-4 in positive and negative regulation of autoimmune pathogenesis are considered and a working model is proposed.