The nude mutation (nu) causes athymia and hairlessness, but the molecular mechanisms by which it acts have not been determined. To address the role of nu in thymogenesis, we investigated whether all or part of the nude thymic epithelium could be rescued by the presence of wild-type cells in nude <--> wild-type chimeric mice. Detailed immunohistochemical analyses revealed that nude-derived cells could persist in the chimeric thymus but could not contribute to cortical or medullary epithelial networks. Nude-derived cells, present in few clusters in the medulla, expressed markers of a rare subpopulation of adult medullary epithelium. The thymic epithelial rudiment of nude mice strongly expressed these same markers, which may therefore define committed immature thymic epithelial precursor cells. To our knowledge, these data provide the first evidence that the nu gene product acts cell-autonomously and is necessary for the development of all major subpopulations of mature thymic epithelium. We propose that nu acts to regulate growth and/or differentiation, but not determination, of thymic epithelial progenitors.