Membrane immunoglobulins (mIg) serve as the recognition components of B lymphocyte antigen receptors. Binding of antigen to these receptors leads to dramatic effects on B cell growth and viability. We have examined the structural elements of mIgM that are involved in antigen receptor assembly and function. Expression of transfected wild-type mIgM in a B cell line led to assembly with the other two known components of the antigen receptor, Ig-alpha and Ig-beta, expression on the cell surface, and when cross-linked by anti-IgM antibodies, stimulation of signal transductin reactions, including tyrosine protein phosphorylation, inositol phosphate production, and increases in cytoplasmic calcium concentration. Replacement of the highly conserved COOH-terminal 41 amino acids of mIgM heavy chain (mu m) with the transmembrane and cytoplasmic domains of human CD8 alpha resulted in a molecule which was expressed on the B cell surface at levels comparable to wild-type mIgM, but which did not form a complex with Ig-alpha or Ig-beta and did not stimulate any of the signaling reactions mentioned above. Replacement of the basic three-amino-acid cytoplasmic domain of mu m with a different but similarly charged sequence had no effect on cell-surface expression or signaling function. On the other hand, removal of the entire cytoplasmic domain resulted in a molecule which did not bind Ig-alpha and Ig-beta and which did not transduce signals. This effect is probably due to altered post-translational processing of this mutant molecule. Finally, a series of eight single-amino-acid substitutions in the transmembrane domain was constructed. Most of these resulted in the removal of hydroxyl groups from conserved residues postulated to be important for interactions with other components. Each of these mutant molecules was capable of transducing signals when cross-linked by anti-IgM, but one was partially defective. Since alteration of any single residue was not sufficient to disrupt signaling completely, the interactions required for signaling are likely to involve multiple residues, so that elimination of one hydroxyl group does not prevent the interaction. We propose that the cytoplasmic domain of mu m does not play a critical role in receptor function but that the transmembrane domain specifies interactions with other components, probably Ig-alpha and Ig-beta, required for proper antigen receptor signal transduction.