Class I and class II molecules encoded by genes within the major histocompatibility complex play a central role in regulation of immune responses through their ability to bind and display small peptides derived from foreign antigens. Within the last few years, considerable progress has been made in understanding the structures of class I and class II MHC molecules, as well as the features of the peptides that are their principal ligands. This review summarizes this information and describes how it accounts for both the specificity and degeneracy of peptide binding. It also considers how the origin and structural features of peptides that have been isolated from MHC molecules, so-called "naturally processed" peptides, have provided insight into the pathways through which the peptides are produced. Finally, the use of new structural information and techniques for peptide characterization for the identification of peptides that comprise epitopes for individual antigen-specific T cells are considered.