Protein kinase C (PKC)theta is an established component of the immunological synapse and has been implicated in the control of AP-1 and NF-kappaB. To study the physiological function of PKCtheta, we used gene targeting to generate a PKCtheta null allele in mice. Consistently, interleukin 2 production and T cell proliferative responses were strongly reduced in PKCtheta-deficient T cells. Surprisingly, however, we demonstrate that after CD3/CD28 engagement, deficiency of PKCtheta primarily abrogates NFAT transactivation. In contrast, NF-kappaB activation was only partially reduced. This NFAT transactivation defect appears to be secondary to reduced inositol 1,4,5-trisphosphate generation and intracellular Ca2+ mobilization. Our finding suggests that PKCtheta plays a critical and nonredundant role in T cell receptor-induced NFAT activation.