IL-7 supports the proliferation of B cell precursors, but inhibits their maturation to mature surface IgM+ (sIgM+) B cells. This inhibition is thought to occur by direct or indirect down-regulation of recombinase genes, preventing the B cells from undergoing Ig light chain rearrangements. To directly analyze the IL-7 inhibitory effects, we studied B cell development and maturation in B cells bearing a transgenic (Tg) B cell receptor (BCR). We show here that proliferation of Tg B cell precursors is IL-7 dependent both in vivo and in vitro and is comparable to that of non-Tg B cell precursors. Tg B cell precursors grown on stroma and IL-7 expressed sIgM on >90% of the cells, and a large proportion of these cells coexpressed additional maturation markers such as IgD, CD23, CD21, and L-selectin, indicating that IL-7 does not inhibit maturation of Tg B cell precursors. The presence of the Tg inhibited V(D)J recombination in the cultured cells, as very low levels of recombination activating genes 2 (RAG-2) expression and endogenous V-Jkappa DNA rearrangements were found. Expression levels of RAG mRNAs were not significantly changed after removal of IL-7 from the in vitro Tg B cell cultures. In contrast, we found that IL-7 inhibited maturation of non-Tg B cell precursors and that removal of IL-7 resulted in a significant increase in RAG-2 expression and kappa rearrangements, thus allowing the B cells to express sIgM and to mature. These results suggest that IL-7-mediated inhibition of Ig gene rearrangement blocks maturation of B cell precursors and that the presence of Tg BCR efficiently circumvents this inhibition.