Natural killer (NK) cells and some T cells are endowed with receptors specific for class I major histocompatibility complex (MHC) molecules that can inhibit cellular effector functions. The function of the Ly49 receptor family has been studied in vitro, but no gene transfer experiments have directly established the role of these receptors in NK cell functions. We show here that transgenic expression of the H-2Dd-specific Ly49A receptor in all NK cells and T cells conferred class I-specific inhibition of NK cell-mediated target cell lysis as well as of T cell proliferation. Furthermore, transgene expression prevented NK cell-mediated rejection of allogeneic H-2d bone marrow grafts by irradiated mice. These results demonstrate the function and specificity of Ly49 receptors in vivo, and establish that their subset-specific expression is necessary for the discrimination of MHC-different cells by NK cells in unmanipulated mice.