IFN-gamma-inducible lysosomal thiol reductase (GILT) is a unique thiol reductase with optimal enzymatic activity at low pH. GILT plays a crucial role in unfolding the antigenic proteins in preparation for their proteolytic cleavage and presentation of resulting peptides by MHC class II. In this study, we demonstrate that GILT is expressed in T lymphocytes and that it has an APC-nonrelated role in the regulation of T cell activation. Surprisingly, comparison of wild-type and GILT-deficient T cell activation in vitro revealed stronger responsiveness in the absence of GILT. The effect of GILT in reducing the proliferative and cytotoxic responses was endogenous to T cells and resulted from decreased sensitivity at the individual cell level. Therefore, a molecule with primarily lysosomal localization suppresses T cell activation, a process characterized by signal transmission from plasma membrane to cytoplasm and nucleus.