Recent evidence suggests that I-E+ thymic epithelium, especially medullary epithelium, can induce partial deletion of superantigen-reactive T cells expressing TcR V beta 5, V beta 11, and V beta 17. To seek further information on this issue, we constructed bone marrow chimeras in which MHC class II I-E is expressed on thymic epithelial cells at various levels and locations; the chimeras were reconstituted with stem cells from TcR V beta 5 transgenic mice. Intrathymic deletion of V beta 5 T cells was restricted to relatively mature T cells (expressing high TcR levels), and the degree of deletion correlated with the density of I-E expression in the thymic medulla rather than in the thymic cortex; selective I-E expression in medullary epithelium caused prominent deletion. Interestingly, immunostaining of normal and chimeric mice revealed that expression of B7 (the ligand for CD28) is largely restricted to a subset of medullary epithelial cells; these cells are I-E+ and co-express a specific carbohydrate bound by the lectin UEA-1. B7 expression was lower in thymuses of class II-deficient mice (A beta b-/-) and T-cell-deficient mice (SCID), suggesting that B7 expression is up-regulated during CD4+ thymocyte selection. In support of this idea, B7 expression in the thymus was restored to a normal level in bone marrow reconstituted SCID mice. Because B7 expression correlates with a costimulatory signal for T cells, selective expression of B7 and related antigens on I-E+ medullary epithelium may explain why these cells play a more prominent role in V beta deletion than cortical epithelium.