Egr2 and 3 are important for maintaining immune homeostasis. Here we define a fundamental function of Egr2 and 3 operating as a checkpoint that controls the transition between clonal expansion and differentiation of effector T cells. Egr2 and 3 deficiency resulted in defective clonal expansion but hyperactivation and excessive differentiation of T cells in response to viral infection. Conversely, sustained Egr2 expression enhanced expansion but severely impaired effector differentiation. Egr2 bound to and controlled the expression of genes regulating proliferation (Myc and Myb) and differentiation repressors (Bcl6, Id3), while repressing transcription factors required for effector function (Zeb2, RORa, RORc, and Bhlhe40). Egr2 and 3 expression in T cells was regulated reciprocally by antigen and IFNγ, providing a mechanism for adjusting proliferation and differentiation of individual T cells. Thus, Egr2 and 3 are upstream regulators of effector CD4 and CD8 T cells that are essential for optimal responses with limited immunopathology.