Toll-like receptor 7 (TLR7) plays an essential role in development of systemic lupus erythematosus by co-stimulating B cells reactive to the endogenous TLR7 ligand Sm/ribonucleoprotein (RNP), a crucial lupus self-antigen. However, how the TLR7-mediated autoimmune response is regulated is not yet known. In this study, we demonstrate that CD72, an inhibitory B cell co-receptor known to prevent development of lupus, recognizes Sm/RNP at the extracellular C-type lectin-like domain (CTLD) and specifically inhibits B cell response to Sm/RNP. Moreover, the CTLD of CD72^c, a lupus-susceptible allele, binds to Sm/RNP less strongly than that of lupus-resistant CD72^a. Reduced binding of CD72^c is supported by x-ray crystallographic analysis that reveals a considerable alteration in charge at the putative ligand-binding site. Thus, CD72 appears to specifically inhibit B cell response to the endogenous TLR7 ligand Sm/RNP through CTLD-mediated recognition of Sm/RNP, thereby preventing production of anti-Sm/RNP antibody crucial for development of lupus.