We developed IgH-transgenic rabbits carrying a productive VDJ-Cmu Tg and found the rabbits were B cell-deficient, with a 50-100% reduction in serum IgM and IgG levels. The bone marrow of newborn Tg rabbits contained severely reduced levels of preB cells and almost no B cells. The few preB cells present in the bone marrow were large, cycling cells that expressed the VDJ-Cmu Tg, indicating that the block in B cell development likely occurred at or before the transition from large (early) preB to small (late) preB cells. By immunoprecipitation, the Tg mu-chain paired with VpreB and lambda5, suggesting that the B cell deficiency is not due to an inability to form a preB cell receptor. Despite the block in B cell development, a few B cells, expressing predominantly endogenous mu-chains, began the second stage of development in GALT. B cells were localized in and beneath the follicle-associated epithelium of GALT prior to B cell follicle formation, suggesting to us that B cell follicle formation is initiated near the follicle-associated epithelium, possibly through contact with intestinal microbiota. These IgH-Tg rabbits should provide a useful model for studies of B cell development both in bone marrow and in GALT.