Chronic viruses and cancers thwart immune responses in humans by inducing T cell dysfunction. Using a murine chronic virus that models human infections, we investigated the function of the adhesion molecule, P-selectin glycoprotein ligand-1 (PSGL-1), that is upregulated on responding T cells. PSGL-1-deficient mice cleared the virus due to increased intrinsic survival of multifunctional effector T cells that had downregulated PD-1 as well as other inhibitory receptors. Notably, this response resulted in CD4(+)-T-cell-dependent immunopathology. Mechanistically, PSGL-1 ligation on exhausted CD8(+) T cells inhibited T cell receptor (TCR) and interleukin-2 (IL-2) signaling and upregulated PD-1, leading to diminished survival with TCR stimulation. In models of melanoma cancer in which T cell dysfunction occurs, PSGL-1 deficiency led to PD-1 downregulation, improved T cell responses, and tumor control. Thus, PSGL-1 plays a fundamental role in balancing viral control and immunopathology and also functions to regulate T cell responses in the tumor microenvironment.