During chronic infection, pathogen-specific CD8+ T cells upregulate expression of molecules such as the inhibitory surface receptor PD-1, have diminished cytokine production and are thought to undergo terminal differentiation into exhausted cells. Here we found that T cells with memory-like properties were generated during chronic infection. After transfer into naive mice, these cells robustly proliferated and controlled a viral infection. The reexpanded T cell populations continued to have the exhausted phenotype they acquired during the chronic infection. Thus, the cells underwent a form of differentiation that was stably transmitted to daughter cells. We therefore propose that during persistent infection, effector T cells stably differentiate into a state that is optimized to limit viral replication without causing overwhelming immunological pathology.