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We have established a comprehensive in vivo mouse model for the CD4(+) T cell response to an "innocuous" versus "dangerous" exogenous Ag and developed an in vivo test for tolerance. In this model, specific gene-expression signatures, distinctive upregulation of early T cell-communication molecules, and differential expansion of effector T cells (Teff) and regulatory T cells (Treg) were identified as central correlates of T cell tolerance and T cell immunity. Different from essentially all other T cell-activation molecules, ICOS was found to be induced in the immunity response and not by T cells activated under tolerogenic conditions. If expressed, ICOS did not act as a general T cell costimulator but selectively caused a massive expansion of effector CD4(+) T cells, leaving the regulatory CD4(+) T cell compartment largely undisturbed. Thus, ICOS strongly contributed to the dramatic change in the balance between Ag-specific Teff and Treg from ∼1:1 at steady state to 21:1 at the height of the immune response. This newly defined role for the balance of Teff to Treg, together with its known key function in T cell help for B cells, establishes ICOS as a central mediator of immunity. Given its exceptionally selective induction on CD4(+) T cells under inflammatory, but not tolerogenic, conditions, ICOS emerges as a pivotal effector molecule in the early decision between tolerance and immunity to exogenous Ag.