CTLA-4 is an immunoregulatory receptor expressed on the surface of activated T and B lymphocytes. The counterreceptors for CTLA-4 are the B7 family molecules. We describe alternatively spliced mRNAs expressed in hematolymphoid tissues of humans, mice, and rats that lack the transmembrane domain coded by exon 3 of the CTLA-4 gene. These alternate transcripts were detected by RT-PCR in B cells and resting T cells of both the CD4 and the CD8 phenotype. Activation of human blood mononuclear cells with PHA or anti-CD3 + anti-CD28 monoclonal antibodies appears to effect a decrease in the amount of the alternative transcript relative to the full-length transcript. Recombinant sCTLA-4 is a B7-binding protein and has immunomodulatory effects as measured by inhibition of the mixed leukocyte response. Human serum contains immunoreactive material consistent with a native soluble form of CTLA-4.