The lambda-5 gene is a homolog of immunoglobulin J(lambda)-C(lambda) genes, expressed specifically in immature B-lineage cells. Lambda-5-encoded molecules form membrane complexes with mu or D(mu) proteins in association with an additional protein specifically expressed in immature B cells that is encoded by the V(pre-B) gene. We have generated mice in which the lambda-5 gene is inactivated by targeted gene disruption in embryonic stem cells. In these mice, B cell development in the bone marrow is blocked at the pre-B cell stage. However, the blockade is leaky, allowing B cells to populate the peripheral immune system at a low rate. These cells are allelically excluded and able to respond to antigen.