Rationale: Repeated antigen-driven proliferations cause CD28 on T cells to down-regulate. We hypothesized that alloantigen-induced proliferations could cause CD28 down-regulation in lung transplant recipients. Objectives: To ascertain if CD28 down-regulation on CD4 T cells associated with manifestations of allograft dysfunction in lung transplant recipients. Methods: Peripheral blood CD4 T cells from 65 recipients were analyzed by flow cytometry, cytokine multiplex and proliferative assays, and correlated with clinical events. Measurements and Main Results: Findings that CD28 was present on less than 90% of total CD4 T cells were predominantly seen among the recipients with bronchiolitis obliterans syndrome (specificity = 88%). Perforin and granzyme B were produced by >50% of the CD4+CD28null cells, but less than 6% of autologous CD4+CD28+ cells (P < 0.006). CD4+CD28null cells also had increased productions of proinflammatory cytokines, but less frequently expressed regulatory T-cell marker FoxP3 (2.1 ± 1.3%), compared with autologous CD4 +CD28+ (9.5 ± 1.4; P = 0.01). Cyclosporine A (100 ng/ml) inhibited proliferation of CD4+CD28null cells by 33 ± 11% versus 68 ± 12% inhibition of CD4+CD28 + (P = 0.025). FEV1 fell 6 months later (0.35±0.04L) in recipients with CD4+CD28+/CD4 total less than 90% (CD28% Low) compared with 0.08 ± 0.08 L among CD4+CD28+/CD4total (CD28% High) greater than 90% (CD28% High) recipients (P = 0.013). Two-year freedom from death or retransplantation in CD28% Low recipients was 32 ± 10% versus 78 ± 6% among the CD28% High subjects (P < 0.0001). Conclusions: CD28 down-regulation on CD4 cells is associated with bronchiolitis obliterans syndrome and poor outcomes in lung transplantation recipients. CD4 +CD28null cells have unusual, potentially pathogenic characteristics, and could be important in the progression of allograft dysfunction. These findings may illuminate a novel paradigm of transplantation immunopathogenesis, and suggest that CD28 measurements could identify recipients at risk for clinical deteriorations.