During B‐lymphocyte development in mouse fetal liver and bone marrow, a pre‐B I cell stage is reached in which the cells express B‐lineage‐specific genes, such as CD19, Iga and Igb, and V_preB and l5, which encode the surrogate light (SL) chain. In these pre‐B I cells both alleles of the immunoglobulin heavy (IgH) chain locus are D_H  J_H rearranged. Transplantation of pre‐B I cells from wild‐type (e.g. C57Bl/6) mice in histocompatible RAG‐deficient hosts leads to long‐term reconstitution of some of the mature B‐cell compartments and to the establishment of normal IgM levels, a third of the normal serum IgA levels, and IgG levels below the detection limit. Neither T‐lineage nor myeloid cells of donor origin can be detected in the transplanted hosts, indicating that the pre‐B I cells are committed to B‐lineage differentiation. Consequently, the B‐cell‐reconstituted hosts respond to T‐cell‐independent antigens but not to T‐cell‐dependent antigens. Responses to T‐cell‐dependent antigens can be restored in the pre‐B I‐cell‐transplanted, RAG‐deficient hosts by the concomitant transplantation of mature CD4+ T cells. The transplanted wild‐type pre‐B I cells do not home back to the bone marrow and become undetectable shortly after transplantation.  B‐lymphocyte development in Pax‐5‐deficient mice becomes arrested at the transition of pre‐B I to pre‐B II cells i.e. at the stage when V_H to D_HJ_H rearrangements occur and when the pre‐B‐cell receptor, complete with H chains and SL chains, is normally formed. T‐lineage and myeloid cell development in these mice is normal. Pre‐B I cells of Pax‐5‐deficient mice have a wild‐type pre‐B I‐cell‐like phenotype: while they do not express Pax‐5‐controlled CD19 gene, and express Iga to a lesser extent, they express Igb, V_preB and l5, and proliferate normally in vitro on stromal cells in the presence of interleukin (IL)‐7. Clones of these pre‐B I cells carry characteristic D_H J_H rearrangements on both IgH chain alleles. However, removal of IL‐7 from the tissue cultures, unlike wild‐type pre‐B I cells, does not induce B‐cell differentiation to surface IgM‐expressing B cells, but induces macrophage differentiation. This differentiation into macrophages requires either the presence of stromal cells or addition of macrophage colony‐stimulating factor (M‐CSF).  Addition of M‐CSF followed by granulocyte–macrophage colony‐stimulating factor induces the differentiation to MHC class II‐expressing, antigen‐presenting dendritic cells. In vitro differentiation to granulocytes and osteoclasts can also be observed in the presence of the appropriate cytokines. Moreover, transplantation of Pax‐5‐deficient pre‐B I clones into RAG‐deficient hosts, while not allowing B‐cell differentiation, leads to the full reconstitution of the thymus with all stages of CD4–CD8– and CD4+CD8+ thymocytes, to normal positive and negative selection of thymocytes in the thymus, and to the development of normal, reactive mature CD4+ and CD8+ T‐cell compartments in the peripheral lymphoid tissues, all carrying the clone‐specific D_HJ_H rearrangements. On the other hand, Iga, Igb, V_preB and l5 are turned off in the thymocytes, demonstrating that the expression of these genes does not commit cells irreversibly to the B lineage. Furthermore, Pax‐5‐deficient pre‐B I cells are long‐term reconstituting cells. They home back to the bone marrow of the RAG‐deficient host, can be reisolated and regrown in tissue culture, and can be retransplanted into a secondary RAG‐deficient host. This again develops thymocytes and mature T cells and allows the transplanted clonal pre‐B I cells to home to the bone marrow.