Apoptosis is often accompanied by the degradation of chromosomal DNA. Caspase-activated DNase (CAD) is an endonuclease that is activated in dying cells, whereas DNase II is present in the lysosomes of macrophages. Here, we show that CAD(-/-) thymocytes did not undergo apoptotic DNA degradation. But, when apoptotic cells were phagocytosed by macrophages, their DNA was degraded by DNase II. The thymus of DNase II(-/-)CAD(-/-) embryos contained many foci carrying undigested DNA and the cellularity was severely reduced due to a block in T cell development. The interferon-beta gene was strongly up-regulated in the thymus of DNase II(-/-)CAD(-/-) embryos, suggesting that when the DNA of apoptotic cells is left undigested, it can activate innate immunity leading to defects in thymic development.