Differentiation of early thymocytes into mature T cells depends upon intrathymic T cell contact with major histocompatibility complex (MHC) molecules, i.e., H-2 molecules in mice. T cell recognition of H-2 molecules in the thymus has two consequences. First, some T cells undergo a process of positive selection which leads specifically-reactive immature thymocytes to survive and differentiate into mature functional T cells. Second, T cells with high affinity for H-2 molecules undergo negative selection (tolerance). We and others have argued that positive selection is controlled by thymic epithelial cells, especially cortical epithelium, whereas negative selection reflects contact with bone-marrow (BM) derived cells. This scheme appears to be an oversimplication because we have recently found evidence that a non-BM-derived component of the thymus, presumably epithelial cells, is highly tolerogenic for CD4+ cells. Whether tolerance of CD4+ cells is controlled by cortical epithelium or medullary epithelium is unclear. In this respect it is of interest that chronic injection of mice with cyclosporine A results in selective destruction of medullary epithelial cells and impaired induction of self tolerance.