We have established conditionally immortalized thymic cortical epithelial cell lines from transgenic mice carrying a temperature-sensitive SV40 large T antigen. One of these cell lines expresses cortical markers and produces IL-1 alpha, IL-6, IL-7, and TGF-beta 1. These cells express class I major histocompatibility complex (MHC) constitutively and class II MHC upon induction with IFN-gamma. The cells appear to have a normal class I antigen presenting pathway since messages for both peptide transporter genes (TAP1, TAP2) were detected. The ability of these cortical epithelial cells to present peptide antigen was compared to that of thymic dendritic cells. In suspension culture with alpha beta T cell receptor (TcR) transgenic thymocytes, these epithelial cells and dendritic cells (pre-pulsed with peptide cognate for the transgenic TcR) caused down-regulation of CD4, CD8, and TcR in an antigen dose-dependent and MHC-restricted manner. CD4dullCD8dull cells were taken as evidence for negative selection because these cells contained apoptotic DNA. Concentration of peptide required for negative selection of thymocytes was similar between dendritic cells and cortical epithelial cells. In contrast, alpha beta TcR transgenic spleen cells were activated only by dendritic cells but not by cortical epithelial cells.