Thy-1, a single variable-like immunoglobulin superfamily domain anchored in the plasma membrane by a glycosyl phosphaditylinositol tail [1], is a major surface glycoprotein in adult mammalian neurons and rodent thymocytes [2]; the function of Thy-1 has remained enigmatic since its discovery [3]. Studies in vitro have implicated Thy-1 in homotypic and heterotypic cell-cell interactions [2,4]. Ligation of Thy-1 initiates transmembrane signaling pathways that lead to diverse physiological outcomes in different cells [2,5-7]. In rodents, Thy-1 is highly expressed on the surface of CD4+CD8+ double-positive immature thymocytes and downregulated in mature T cells. Here, we report that thymocytes from Thy-1-/- mice [8] had altered cell-cell contacts, and hyperresponsiveness to T-cell receptor (TCR) triggering as demonstrated by the heightened activation of p56lck, phosphorylation of TCR subunits, Ca2+ fluxes and cell proliferation. Thy-1-/- thymocytes exhibited impaired maturation from the double positive to single positive stage of thymocyte development, possibly due to inappropriate negative selection, and were prone to T lymphomas in aged mice. These observations indicate that Thy-1 negatively regulates TCR-mediated signaling and controls activation thresholds during thymocyte differentiation.