Over the past three years, CD40 and its ligand (gp39, CD40L, TBAM) have been shown to be essential for humoral immune responses to thymus-dependent antigens. However, as the tissue distribution widens for those cells that express CD40 and gp39, we can now show that this ligand-receptor pair also plays an important role in the selection of self-reactive T cells in the thymus (central tolerance) and the regulation of tolerance in mature T cells (peripheral tolerance). Advances in our understanding of the molecular basis for CD40 biology is based in two areas of research. First, a major breakthrough in our understanding of how CD40 transduces biological events centers on the identification of a novel protein that binds to the cytoplasmic tail of CD40 and may act as a signal transducing molecule. Secondly, advances in molecular modeling and mutagenesis of this ligand-receptor pair have helped to identify the critical receptor/ligand contacts in the gp39/CD40 complex. Advances in each of these areas are discussed.