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The CD45 transmembrane glycoprotein has been shown to be a protein phosphotyrosine phosphatase and to be important in signal transduction in T and B lymphocytes. We have employed gene targeting to create a strain of transgenic mice that completely lacks expression of all isoforms of CD45. The spleens from CD45-null mice contain approximately twice the number of B cells and one fifth the number of T cells found in normal controls. The increase in B cell numbers is due to the specific expansion of two B cell subpopulations that express high levels of immunoglobulin (IgM) staining. T cell development is significantly inhibited in CD45-null animals at two distinct stages. The efficiency of the development of CD4-CD8- thymocytes into CD4+ CD8+ thymocytes is reduced by twofold, subsequently the frequency of successful maturation of the double positive population into mature, single positive thymocytes is reduced by a further four- to fivefold. In addition, we demonstrate that CD45-null thymocytes are severely impaired in their apoptotic response to cross-linking signals via T cell receptor (TCR) in fetal thymic organ culture. In contrast, apoptosis can be induced normally in CD45-null thymocytes by non-TCR- mediated signals. Since both positive and negative selection require signals through the TCR complex, these findings suggest that CD45 is an important regulator of signal transduction via the TCR complex at multiple stages of T cell development. CD45 is absolutely required for the transmission of mitogenic signals via IgM and IgD. By contrast, CD45-null B cells proliferate as well as wild-type cells to CD40- mediated signals. The proliferation of B cells in response to CD38 cross-linking is significantly reduced but not abolished by the CD45- null mutation. We conclude that CD45 is not required at any stage during the generation of mature peripheral B cells, however its loss reveals a previously unrecognized role for CD45 in the regulation of certain subpopulations of B cells.