A hallmark of T cell activation in vitro and in vivo is the clustering of T cells with each other via interaction of the LFA-1 integrin with ICAM-1. The functional significance of these homotypic aggregates in regulating T cell function remains unknown. We used an APC-free in vitro activation system to demonstrate that stimulation of purified naive CD8 T cells results in enhanced expression of ICAM-1 on T cells that is sustained by the inflammatory cytokine IL-12 and associated with robust T cell aggregates. ICAM-1-deficient CD8 T cells proliferate normally but demonstrate a striking failure to aggregate. Interestingly, loss of ICAM-1 expression results in elevated levels of IFN-γ and granzyme B, as well as enhanced cytotoxicity. Similar results were obtained when anti-LFA-1 Ab was used to block the clustering of wild-type T cells. ICAM-1 ligation is not required for IFN-γ regulation, as clustering of ICAM-1-deficient CD8 T cells with wild-type T cells reduces IFN-γ expression. Analysis using a fluorescent reporter that monitors TCR signal strength indicates that T cell clustering limits T cell exposure to Ag during activation. Furthermore, T cell clustering promotes the upregulation of the CTLA-4 inhibitory receptor and the downregulation of eomesodermin, which controls effector molecule expression. Activation of ICAM-1-deficient CD8 T cells in vivo results in an enhanced percentage of KLRG-1+ T cells indicative of short-lived effectors. These results suggest that T cell clustering represents a mechanism that allows continued proliferation but regulates T cell effector function and differentiation.