Abstract Memory phenotype T cells, found in unimmunized mice, display phenotypic and functional traits of memory cells and provide essential protection against infections, playing a role in both innate and adaptive immune responses. Mechanisms governing homeostasis of these memory phenotype T cells remain ill-defined. In this study, we reveal a crucial role of the negative costimulator programmed death-1 (PD-1) in regulating developmental fates of memory phenotype cells. Thus, in lymphoid organs and tissues of PD-1 knockout (KO) mice a marked accumulation of functional effector memory (TEM) phenotype CD8 T cells was observed. TEM phenotype cells from PD-1 KO mice exhibit decreased proliferation but increased survival potential. These cells could produce effector molecules constitutively, in response to phorbol esters or through bystander activation by innate stimuli. Similarly, in lymphopenia-induced proliferating CD8 T cells, whereby normally naive T cells acquire a memory phenotype, skewing toward a TEM phenotype was prominent in the absence of PD-1. Acquisition of the TEM phenotype was a CD8 T cell–intrinsic phenomenon as demonstrated by mixed bone marrow transfer experiments. Importantly, adoptively transferred PD-1 KO CD8 central memory T (TCM) cells converted into the TEM phenotype, indicating that PD-1 sets a major checkpoint in the TCM to TEM phenotype differentiation process. This was reflected by distinct patterns of gene expression of PD-1 KO TCM phenotype cells revealed by global transcriptional analysis. Additionally, adoptively transferred PD-1 KO TEM phenotype cells converted to a lesser degree to a TCM phenotype. Collectively, these data suggest that PD-1 shapes memory phenotype CD8 T cell subsets.