CD26 is a 110 kDa surface glycoprotein with intrinsic dipeptidyl peptidase IV (DPPIV, EC 3.4.14.5) activity that is expressed on numerous cell types and has a multitude of biological functions. CD26 role in immune regulation has been extensively characterized, with recent findings elucidating its linkage with signaling pathways and structures involved in T-lymphocyte activation as well as antigen presenting cell (APC)-T-cell interaction. In this paper, we will review emerging data on CD26-mediated T-cell costimulation, suggesting that CD26 may be an appropriate therapeutic target for the treatment of immune disorders. However, the identity of its putative natural ligand had not yet been clearly elucidated. Recently, using protein engineering and proteomic approach, we have recently characterized the putative costimulatory ligand for CD26 in T-cells and the proximal signaling events directly associated with the cytoplasmic region of CD26 in CD26-associated T-cell costimulation, processes that are independent of the CD28 costimulatory pathway. Our work therefore presents novel findings that contribute to the area of T-cell costimulation and signal transduction.