During development, discrete cell fates often result from variation in the intensity of a particular signal. The mechanisms underlying these seemingly analog-to-digital switches are not understood. In developing T lymphocytes, low-intensity signals through the antigen receptor result in positive selection while more intense signals give rise to negative selection. By deleting the genetic locus encoding the regulatory B1 subunit of calcineurin specifically in thymocytes, we found an absolute requirement for calcineurin in positive selection. In contrast, calcineurin activity was dispensable in several models of negative selection. Unexpectedly, we found that removal of calcineurin activity from thymocytes results in inefficient ERK activation at the double-positive stage of thymocyte development, when selection occurs. These studies clarify the mechanism by which graded signals are converted to discrete outcomes in T cell development and further indicate that the developmental roles of calcineurin likely contribute to immunosuppression by calcineurin inhibitors.