CD4 and CD8 are expressed on mutually exclusive T cell populations that can recognize peptides bound to class II and class I MHC Ags, respectively. These populations have different functions and are different in their capacity to produce cytokines. In this paper we demonstrate that this functional differentiation occurs at the CD3low- CD3high transitional stage: single positive mature CD4+ thymocytes express IL-2 mRNA in vivo, whereas CD8+ thymocytes primarily express perforin. IL-2, perforin, and IFN-gamma mRNAs were almost absent in CD4+CD8+ CD3low but were clearly detectable in CD4+CD8+ CD3high cells, indicating that these genes are induced at the CD3low- CD3high transitional stage. In contrast, IL-4 mRNA levels were highest in the precursor cells but dropped sharply at the CD3low-CD3high transitional stage. These data are consistent with and link two earlier observations, i.e., that activation occurs at the CD3low-CD3high transition and that functional differentiation in helper and cytotoxic cells is already accomplished in the single positive thymocytes. This activation may reflect positive selection and concomitant functional differentiation into helper and cytotoxic T cells.