CTLA‐4 is a crucial immune regulator that mediates both negative costimulation signals to T cells, and regulatory T (Treg)‐cell extrinsic control of effector responses. Here we present evidence supporting a novel mechanism for this extrinsic suppression, executed by the alternatively spliced soluble CTLA‐4 isoform (sCTLA‐4). Analyses of human T cells in vitro show that sCTLA‐4 secretion can be increased during responses, and has potent inhibitory properties, since isoform‐specific blockade of its activity significantly increased Ag‐driven proliferation and cytokine (IFN‐γ, IL‐17) secretion. Treg cells were demonstrated to be a prominent source of sCTLA‐4, which contributed to suppression in vitro when their numbers were limiting. The soluble isoform was also produced by, and inhibited, murine T cells responding to Ag in vitro, and blockade of its activity in vivo protected against metastatic spread of melanoma in mice. We conclude that sCTLA‐4 is an important immune regulator, responsible for at least some of the inhibitory effects previously ascribed to the membrane‐bound isoform. These results suggest that the immune system exploits the different CTLA‐4 isoforms for either intrinsic or extrinsic regulation of T‐cell activity.