Ig-like transcript 2 (ILT2)/leukocyte Ig-like receptor 1 (LIR1) is a receptor, specific for MHC class I molecules, that inhibits lymphoid and myeloid cells. Here, we analyzed the molecular and cellular mechanisms by which ILT2 modulates T cell activation in primary CTLs and transfected T cell lines. We found that cross-linking with the TCR and the activity of Src tyrosine kinase p56lck were required for phosphorylation of ILT2 and subsequent recruitment of Src homology protein 1. In contrast, ILT2 triggering resulted in reduced phosphorylation of TCRζ and linker for activation of T cells, which led to reduced TCRζ-ZAP70 complex formation, as well as extracellular signal-related kinase 1 and 2 activation. Furthermore, ILT2 inhibited both superantigen and anti-TCR Ab-induced rearrangement of the actin cytoskeleton. The inhibitory effect mediated by ILT2 is probably concentrated at the APC-T cell interface because both TCR and ILT2 were strongly polarized toward the APC upon engagement by their specific ligands. Thus, ILT2 inhibits both signaling and cellular events involved in the activation of T cells.