T helper (Th) cell activation, differentiation, and immune function are regulated by costimulatory molecules. Inducible costimulator (ICOS) is a recently identified costimulatory receptor expressed on activated T cells. A ligand for ICOS, B7h, is expressed on B cells and other types of antigen-presenting cells (APC). Although ICOS has been shown to be essential in T cell activation and differentiation, the regulatory roles of B7h at different stages of T cell immune responses have not been examined genetically. In this study, we generated and analyzed B7h-deficient mice. We present evidence that B7h is the only ligand for ICOS, and ICOS, its only corresponding receptor. Th cells, when activated with B7h-deficient APC, exhibited reduced proliferation and IL-2 production. In addition, Th cells produced significantly reduced amounts of IL-4 and -13 after differentiation at the presence of B7h-/- APC. This cytokine defect was associated with a deficiency in c-Maf expression and could be rescued completely by c-Maf overexpression in T cells. Furthermore, we showed that effector T cells, when restimulated in the presence of B7h-deficient APC, exhibited reduced Th2 cytokine production. Therefore, B7h is required for proper Th cell activation, differentiation, and effector cytokine expression.