Binding of CD154 to its receptor, CD40, provides costimulation for mature B cell activation and differentiation in response to Ag receptor signals. In mice, early B cell precursors express CD40, but its function at this stage is unknown. We examined the effects of CD40 ligation during B cell ontogeny in transgenic mice constitutively expressing CD154 on B cells (kappaEP-CD154). Precursors beyond pro-B cells were absent in adult bone marrow but were increased in the fetal liver. Newborn kappaEP-CD154 mice had largely increased numbers of peripheral B cells, which were CD154+, and that 36 h after birth expressed high surface levels of CD23 and MHC class II, resembling activated mature B cells. Nevertheless, kappaEP-CD154 mice were hypogammaglobulinemic, indicating that the expanded population of apparently activated B cells was nonfunctional. Further analysis revealed that soon after birth, kappaEP-CD154 mice-derived B cells became CD5+/Fas+, after which progressively decreased in the periphery in a CD154-CD40-dependent manner. These results indicate that CD40 ligation during B cell ontogeny induces negative selection characterized by either hyporesponsiveness or an arrest in maturation depending on the time of analysis and the anatomic site studied.