We used gene targeting techniques to produce mice lacking the invariant chain associated with major histocompatibility complex (MHC) class II molecules. Cells from these mice show a dramatic reduction in surface class II, resulting from both defective association of class II alpha and beta chains and markedly decreased post-Golgi transport. The few class II alpha/beta heterodimers reaching the cell surface behave as if empty or occupied by an easily displaced peptide, and display a distinct structure. Mutant spleen cells are defective in their ability to present intact protein antigens, but stimulate enhanced responses in the presence of peptides. These mutant mice have greatly reduced numbers of thymic and peripheral CD4+ T cells. Overall, this striking phenotype establishes that the invariant chain plays a critical role in regulating MHC class II expression and function in the intact animal.