An active v-abl protein tyrosine kinase blocks immunoglobulin light-chain gene rearrangement. Lymphoid cells transformed by Abelson murine leukemia virus have provided one of the classic models for study of early B-cell development and immunoglobulin rearrangement. Most of these cells have rearranged their heavy-chain locus but not their light chain genes, suggesting that an active v-abl protein interferes with this differentiation step. To test this hypothesis, light-chain gene structure was examined in pre-B cells transformed by temperature-sensitive mutants of the Abelson virus and in derivatives that survive at the nonpermissive temperature because they express a human BCL-2 gene. Our studies reveal that inactivation of the v-abl protein tyrosine kinase triggers high-frequency rearrangement of kappa and lambda light-chain genes. These events are accompanied by marked increases in the expression of RAG-1 and RAG-2 RNAs. These increases occur in the absence of protein synthesis but are dependent on inactivation of the v-abl protein tyrosine kinase. As documented in the accompanying paper (Klug et al., this issue), an active v-abl protein also suppresses the activity of NF-kappa B/rel and expression controlled by the kappa intron enhancer. Together these data demonstrate that the v-abl protein specifically interferes with light-chain gene rearrangement by suppressing at least two pathways essential for this stage of B-cell differentiation and suggest that tyrosine phosphorylation is important in regulating RAG gene expression.