The CD3 epsilon subunit of the TCR complex contains two defined signaling domains, a proline-rich sequence and an ITAM. We identified a third signaling sequence in CD3 epsilon, termed the basic-rich stretch (BRS). Herein, we show that the positively charged residues of the BRS enable this region of CD3 epsilon to complex a subset of acidic phospholipids, including PI(3)P, PI(4)P, PI(5)P, PI(3,4,5)P(3), and PI(4,5)P(2). Transgenic mice containing mutations of the BRS exhibited varying developmental defects, ranging from reduced thymic cellularity to a complete block in T cell development. Peripheral T cells from BRS-modified mice also exhibited several defects, including decreased TCR surface expression, reduced TCR-mediated signaling responses to agonist peptide-loaded APCs, and delayed CD3 epsilon localization to the immunological synapse. Overall, these findings demonstrate a functional role for the CD3 epsilon lipid-binding domain in T cell biology.