Thymic epithelial cells (TECs) are the key components in thymic microenvironment for T cells development. TECs, composed of cortical and medullary TECs, are derived from a common bipotent progenitor and undergo a stepwise development controlled by multiple levels of signals to be functionally mature for supporting thymocyte development. Tumor necrosis factor receptor (TNFR) family members including the receptor activator for NF κ B (RANK), CD40, and lymphotoxin β receptor (LT β R) cooperatively control the thymic medullary microenvironment and self-tolerance establishment. In addition, fibroblast growth factors (FGFs), Wnt, and Notch signals are essential for establishment of functional thymic microenvironment. Transcription factors Foxn1 and autoimmune regulator (Aire) are powerful modulators of TEC development, differentiation, and self-tolerance. Dysfunction in thymic microenvironment including defects of TEC and thymocyte development would cause physiological disorders such as tumor, infectious diseases, and autoimmune diseases. In the present review, we will summarize our current understanding on TEC development and the underlying molecular signals pathways and the involvement of thymus dysfunction in human diseases.