Ordered rearrangements of immunoglobulin (Ig) gene loci, first as DH to JH, then as VH to DHJH, and finally as VL to JL segment-specific recombinations occur 'in-frame' and 'out-of-frame'. 'In-frame' rearrangements lead to the expression of truncated DHJH-microC proteins and to microH chains. These H chain proteins have two major effects on precursor B cells. They suppress (as DJC mu proteins) or enhance (as full microH chain) the proliferation of precursor cells at the point where these precursors express these proteins. At the same time, they signal allelic exclusion of the microH chain alleles, so that VH to DHJH rearrangement at the second allele is suppressed. Regulation of precursor B cell proliferation and H chain allelic exclusion is mediated by a pre-B cell receptor that is composed of the microH chains and a surrogate L chain. This surrogate L chain is made up of two proteins encoded by the Vpre-B and lambda 5 genes that are expressed only at the early precursor cell stages just before and when H chain genes are first expressed. They are not found in later B cell development, when L chains are expressed, nor in any other cell of the body tested so far. The physiological roles of surrogate L chain and of the pre-B receptor have been clarified by generating mutant mice in which the lambda 5 gene has been inactivated by targeted disruption. Molecular mechanisms and cellular developments, by which the pre-B receptor controls proliferation and allelic exclusion, are discussed.