The effect of the Epstein-Barr virus (EBV) latent membrane protein 1 (LMP1) on the activation and differentiation of normal B cells was investigated. B cells of transgenic mice expressing LMP1 under the control of immunoglobulin promoter/enhancer displayed enhanced expression of activation antigens and spontaneously proliferated and produced antibody. Humoral immune responses of LMP1 transgenic mice in CD40-deficient or normal backgrounds revealed that LMP1 mimics CD40 signals to induce extrafollicular B cell differentiation but, unlike CD40, blocks germinal center formation. Thus, these specific properties of LMP1 may determine the site of primary B cell infection and the state of infection in the natural course of EBV infection, whereas subsequent loss of LMP1 expression may affect the site of persistent latent infection.