To investigate tolerance to extrathymic self molecules, we produced two groups of transgenic mice: one expressed the major histocompatibility complex molecule H-2Kb in pancreatic beta cells, and the other expressed rearranged T-cell receptor genes encoding an anti-H-2Kb receptor. The transgenic T-cell receptor genes were shown to confer the correct specificity and to be expressed appropriately. T cells bearing this receptor were activated by H-2Kb in vitro and in vivo, and they underwent negative selection in mice expressing H-2Kb in the thymus. To determine the fate and function of these anti-H-2Kb T cells in mice expressing H-2Kb exclusively in the periphery, the two groups of transgenic mice were mated to produce double transgenic offspring. In these, transgene-expressing T cells were present in both thymus and periphery. Persisting T cells had not down-regulated either their antigen-specific receptors or their CD8 molecules. Despite the persistence of large numbers of potentially reactive T cells, the mice were tolerant of H-2Kb in that they could not reject H-2Kb-bearing skin grafts, although they did reject third-party grafts. The results show that peripheral T-cell tolerance, unlike that imposed in the thymus, does not involve deletion of T cells. The existence of T cells bearing receptors specific for self components raises the possibility that aberrant activation of such cells may lead to the development of autoimmune disease.