TNF-alpha converting enzyme (TACE; ADAM17), a member of the ADAM (a disintegrin and metalloprotease) family of metalloproteases, has been shown to cleave a wide variety of cell surface proteins of immunological importance. Due to the broad expression of TACE and the early postnatal lethality of TACE-deficient mice, it has been difficult to assess the role of TACE in lymphocyte development. Indeed, it is not known whether hemopoietic and/or nonhemopoietic expression of TACE is required for normal lymphocyte development. In the current study, we analyzed the lymphoid system of tace(DeltaZn/DeltaZn) mice and tace(DeltaZn/DeltaZn) bone marrow RAG1(-/-) recipients. Our results clearly show that nonlymphocyte expression of TACE is required for normal lymphocyte development and lymphoid organ structure. Lack of TACE function resulted in a partial block in T cell development at the double-negative 4:double-positive transition in the thymus, a loss of B cell development/maturation in the spleen, and a lack of B cell follicle and germinal center formation in the spleen. Thus, TACE serves as a lymphocyte extrinsic factor that is essential for normal T development and peripheral B cell maturation.