The cross-linking of membrane IgM (mIgM) triggers the activation and differentiation of B lymphocytes. One very rapid result of the cross-linking is the activation of phospholipase C, the subsequent mobilization of free calcium from internal stores and the activation of protein kinase C. This is followed by a redistribution of the receptor-ligand complexes to a small cap on the B cell surface, the first step in endocytosis and antigen processing. Cross-linking of major histocompatibility complex (MHC) class I neither stimulates the release of intracellular calcium nor does it induce capping and endocytosis of the cell surface receptors. In this study, we sought to determine the role of the two carboxyterminal domains of the mu heavy chain in signal transduction, capping and endocytosis of mIgM. We took advantage of the clear differences between MHC class I molecules and mIgM, replacing the transmembrane and cytoplasmic domains of mu by their MHC class I equivalents. Our results show that the hybrid heavy chain could still associate with light chains and assemble into a tetramer on the cell surface. However, cross-linking of the hybrid cell receptor produced neither release of calcium from internal stores, nor capping and endocytosis. These observations demonstrate that the two carboxy-terminal domains of mu are critical to both signal transduction and modulation of the mIgM-ligand complexes from the surface of B lymphocytes.