CD4 T cells, particularly those of the T-helper 1 (Th1) subset, are important effectors in alloimmune diseases, such as graft-versus-host disease, and in controlling infections with intracellular pathogens. Thus, it is plausible that impaired neonatal CD4 T-cell immunity might contribute to the low incidence of acute graft-versus-host disease after allogeneic transplantation of hematopoietic stem cells using cord blood (CB) compared with adult sources of hematopoietic stem cells. In support of this hypothesis, we found that CB naive CD4 T cells had reduced activation and impaired early Th1 differentiation compared with adult peripheral blood naive CD4 T cells after stimulation by allogeneic dendritic cells derived from adult monocytes. Early Th1 polarization was dependent on interleukin-12 and CD154, and CB CD4 T cell/dendritic cell co-cultures had impaired expression of both proteins. CB naive CD4 T cells had low basal levels of signal transduction and activation of transcription 4 messenger RNA and protein, and, after alloantigen stimulation, reduced interleukin-12-induced signal transduction and activation of transcription 4 tyrosine phosphorylation, compared with adult peripheral blood naive T cells. Lastly, FoxP3 protein expression, a marker for regulatory CD25(high) CD4 T cells, was lower for naive CD4 T cells of CB compared with those of adult peripheral blood, which argued against increased T-regulatory activity as a mechanism for the decreased Th1 differentiation of CB CD4 T cells. Together, these intrinsic limitations in T-cell activation and Th1 differentiation may impair the ability of T cells in CB and the neonate to respond to allogeneic or infectious challenges.