Recent insights into the mechanism of V(D)J recombination have clarified the direct role of the products of the recombination-activating genes Rag-1 and Rag-2 in site-specific DNA cleavage at recombination signal sequences and have identified components of the general DNA double-strand break repair pathway that participate in the rejoining of the Rag-1 and Rag-2-cut receptor gene segments. The V(D)J reaction is restricted to particular antigen receptor loci in a lineage-specific and stage-specific manner. This specificity appears to involve cis-regulatory elements, some of which also regulate transcription of the germline antigen receptor loci. Early developmental steps in the T and B lineages - including phenotypic differentiation, expansion of precursors, and selection processes - are effected in a stepwise fashion by signals generated, at least in part, by the products of the functionally rearranged antigen receptor genes themselves.