Development of natural killer (NK) cells is thought to depend on interactions between NK progenitors and the bone marrow (BM) microenvironment; however, little is known about the molecular signals involved. Here we show that lymphotoxin (LT) provides an important signal for the development of both NK cells and NK/T cells. LTalpha-/- mice show marked reduction in splenic and BM NK and NK/T cell numbers and dramatically impaired NK and NK/T cell function. Mice deficient in either tumor necrosis factor receptor (TNFR)-I or TNFR-II have normal numbers of NK and NK/T cells, implying that neither of the TNFRs nor soluble LTalpha3 is required for development of these cell types. Reciprocal BM transfers between LTalpha-/- and wild-type mice suggest that close interactions between membrane LT-expressing NK cell precursors and LT-responsive radioresistant stromal cells are necessary for NK cell development. When LT-deficient BM cells are incubated with IL-15, NK cells are formed. In addition, LT-deficient BM cells produce IL-15 after activation. Thus, membrane LT appears to deliver a signal for NK cell development that is either independent of IL-15 or upstream in the IL-15 pathway. These results reveal a novel function for membrane LT in NK and NK/T cell development. They also support a cellular and molecular mechanism by which NK cell precursors themselves deliver essential signals, through the membrane ligand, that induce the microenvironment to promote further NK cell and NK/T cell development.