Abstract Biomarkers defining pathogenic effector T cells slowly have been forthcoming. Towards this we identified CD4+ cells that express CD40 (CD4CD40), defining these cells as pathogenic in the NOD type 1 diabetes (T1D) model where these cells are unique in their ability to adoptively transfer T1D. To study the origin of CD4CD40 cells and disease pathogenesis we employed a dual transgenic model expressing OVA323-339 peptide as a neo-self antigen on islet beta cells and medullary thymic epithelial cells (mTEC) and a transgenic TCR recognizing the OVA323-339 peptide. CD4CD40 cells and Tregs each recognizing the cognate neo-antigen, rather than being deleted through central tolerance drastically expand in the thymus. DO11.RIPmOVA mice develop autoimmune-type diabetes. In pancreatic lymph nodes CD4CD40 cells are greatly expanded while Tregs remain equivalent to controls and importantly remain functional throughout the disease process, suggesting another breach of tolerance mechanism. DO11.RIPmOVA CD4CD40 cells do not express CTLA-4, a molecule for cell auto-regulation, while DO11 Th40 cells do. CD3/CD28 engagement induces CTLA-4 cell surface expression on DO11 CD4CD40 cells while CD40 co-engagement ablates that induction. Injected antigen (OVA) challenge induces CTLA-4 on CD4CD40 cells while the same antigen expressed endogenously does not. Thus the mechanism of antigen exposure dictates potential tolerance. These data suggest a unique means for CD4CD40 cells to thwart tolerance.