The Pax5 gene coding for the transcription factor BSAP has an essential role in B lymphopoiesis and midbrain development. Here we present a detailed analysis of the B-cell phenotype of Pax5 mutant mice that revealed a differential dependency of fetal and adult B lymphopoiesis on this transcriptional regulator. B-cell development is arrested in the bone marrow at the early pro-B (pre-BI) cell stage, which is characterized by expression of the early markers c-kit, CD43, lambda5, VpreB, and HSA and the absence of the later markers CD25 and BP-1. These pre-BI cells fail to express the BSAP target gene CD19 and are capable of long-term proliferation in vitro in the presence of stromal cells and IL-7. B-lymphoid progenitors could not be detected in the fetal liver of Pax5 mutant embryos. However, Pax5-deficient fetal liver cells gave rise to the development of pre-BI cells in bone marrow on transplantation into lethally irradiated mice. These data indicate different functions of Pax5 in the distinctive microenvironments of fetal liver and adult bone marrow. As shown by PCR analyses, the pre-BI cells in Pax5-deficient bone marrow have undergone D(H)-to-J(H) rearrangement of the immunoglobulin heavy-chain locus at normal frequency. In contrast, V(H)-to-D(H)J(H) rearrangements were reduced approximately 50-fold in Pax5-deficient pre-BI cells, suggesting a role for Pax5 in the developmental pathway controlling V-to-DJ recombination.