Mice with the Steel mutation were studied to determine whether they showed a morphologic difference in the epithelial-reticular microenvironment of the thymus when compared with their normal and heterozygous littermate controls. Thymuses taken directly from fetal and newborn homozygous SlWehi/SlWehi mice, after culture, and after subcapsular renal grafting were compared by light and electron microscopy with similarly treated thymuses from heterozygous SlWehi/+ and normal homozygous (+/+) littermates. At all developmental stages studied, the homozygous mutants had smaller thymuses with fewer lymphoid cells than their homozygous normal and heterozygous littermates. The homozygous mutants also showed ultrastructural abnormalities in the thymic epithelial cells. After organ culture, homozygous fetal mutant thymuses produced fewer lymphocytes and showed abnormalities of epithelial cell ultrastructure when compared with littermate controls. When mutant and control fetal thymuses were grafted under opposite kidney capsules of normal syngenic recipients, the mutant thymuses developed poorly and showed decreased lymphopoiesis and abnormalities of epithelial cell structure. The data suggest that there is a primary epithelial microenvironmental defect in the thymus of mice with the Steel mutation.