Abstract Ligation of either CD28 or inducible costimulatory protein (ICOS) produces a second signal required for optimal T cell activation and proliferation. One prominent difference between ICOS- and CD28-costimulated T cells is the quantity of IL-2 produced. To understand why CD28 but not ICOS elicits major increases in IL-2 expression, we compared the abilities of these molecules to activate the signal transduction cascades implicated in the regulation of IL-2. Major differences were found in the regulation of phosphatidylinositol 3-kinase activity (PI3K) and c-jun N-terminal kinase. ICOS costimulation led to greatly augmented levels of PI3K activity compared with CD28 costimulation, whereas only CD28 costimulation activated c-jun N-terminal kinase. To examine how these differences in signal transduction affected IL-2 production, we transduced primary human CD4 T cells with a lentiviral vector that expressed the murine CD28 extracellular domain with a variety of human CD28 and ICOS cytoplasmic domain swap constructs. These domains were able to operate as discrete signaling units, suggesting that they can function independently. Our results show that even though the ICOS Src homology (SH) 2 binding domain strongly activated PI3K, it was unable to substitute for the CD28 SH2 binding domain to induce high levels of IL-2 and Bcl-xL. Moreover, the CD28 SH2 binding domain alone was sufficient to mediate optimal levels of Bcl-xL induction, whereas the entire CD28 cytoplasmic tail was required for high levels of IL-2 expression. Thus, differences within their respective SH2 binding domains explain, at least in part, the distinct regulation of IL-2 and Bcl-xL expression following ICOS- or CD28-mediated costimulation.