Positive selection of T-cell precursors is the process by which a diverse T-cell repertoire is established. Positive selection begins at the CD4(+)CD8(+) double positive (DP) stage of development and involves at least two steps. First, DP thymocytes down-regulate CD8 to become transitional single positive (TSP) CD4(+) thymocytes. Then, cells are selected to become either mature single positive CD4(+) or mature single positive CD8(+) thymocytes. We sought to define the function of Gads during the two steps of positive selection by analyzing a Gads-deficient mouse line. In Gads(+/+) mice, most TSP CD4(+) thymocytes are TCR(hi)Bcl-2(hi)CD69(+), suggesting that essential steps in positive selection occurred in the DP stage. Despite that Gads(-/-) mice could readily generate TSP CD4(+) thymocytes, many Gads(-/-) TSP CD4(+) cells were TCR(lo)Bcl-2(lo)CD69(-), suggesting that Gads(-/-) cells proceeded to the TSP CD4(+) stage prior to being positively selected. These data suggest that positive selection is not a prerequisite for the differentiation of DP thymocytes into TSP CD4(+) thymocytes. We propose a model in which positive selection and differentiation into the TSP CD4(+) stage are separable events and Gads is only required for positive selection.