The baculovirus expression vector was used to produce full length, two amino-terminal Ig-like extracellular domains, and one amino-terminal Ig-like extracellular domain soluble murine CD2 products. The products were monomeric, glycosylated, and of the correct predicted m.w. Sf9 insect cells infected with recombinant baculovirus encoding the full length construct display cell surface CD2 by flow cytometry and rosette with murine cell lines that express the ligand for CD2. Uninfected Sf9, wild-type baculovirus-infected Sf9, and Sf9 expressing truncated products do not display cell surface CD2 nor do these latter Sf9 bind to murine cell lines. Cell binding is inhibited by anti-CD2 mAb. All CD2 products possess ligand binding activity since purified preparations of these block cell adhesion. All CD2 antigenic epitopes are close to the ligand binding site because all mAb tested can inhibit cell adhesion. The ligand for CD2 is shown to be CD48. Only CD48+ cell lines can bind CD2+ Sf9 and this is inhibited by anti-CD48 mAb. Antibodies against the closely related cell surface Ag Ly-6A.2 and Ly-9.2 do not inhibit binding. Purified, soluble CD2 also inhibits the binding of anti-CD48 mAb to the cell surface. Unexpectedly, additional mAb blocking studies show that CD2 on the surface of CD48+ cell lines influences adhesion to CD2+ binding partners. The use of cells expressing CD2 and/or CD48 provides evidence for a cis CD2-CD48 interaction on the cell surface in which CD2 negatively regulates CD48 adhesion properties.