The aryl hydrocarbon (Ah) receptor (AHR) mediates many carcinogenic and teratogenic effects of environmentally toxic chemicals such as dioxin. An AHR-deficient (Ahr(-/-)) mouse line was constructed by homologous recombination in embryonic stem cells. Almost half of the mice died shortly after birth, whereas survivors reached maturity and were fertile. The Ahr(-/-) mice showed decreased accumulation of lymphocytes in the spleen and lymph nodes, but not in the thymus. The livers of Ahr(-/-) mice were reduced in size by 50 percent and showed bile duct fibrosis. Ahr(-/-) mice were also nonresponsive with regard to dioxin-mediated induction of genes encoding enzymes that catalyze the metabolism of foreign compounds, Thus, the AHR plays an important role in the development of the liver and the immune system.