The precursor frequency of naive CD4(+) T cells shows an inverse relationship with the number of memory cells generated after exposure to cognate Ag. Using the lymphocytic choriomeningitis virus (LCMV) model, we show here that only when the initial number of naive virus-specific CD4(+) T cell precursors is low (< or =10(4) per spleen) do they give rise to abundant and homogeneous memory cells that are CD62L(low), IL-7R(high), and imbued with an enhanced capacity to produce cytokine, proliferate, and survive over time. Furthermore, memory cells derived from a high naive precursor number show functional deficits upon secondary exposure to virus. The negative effect of higher naive precursor frequency was not attributable to competition for limiting amounts of Ag, because LCMV-naive CD4(+) TCR-transgenic CD4 T cells were recruited into the LCMV-induced response even when their initial number was high. Instead, the T cells appear to compete for direct IFN-gamma signals as they differentiate into memory cells. These results are consistent with a model of T cell development in which the most fit effector T cells that receive sufficient direct IFN-gamma signals are selected to differentiate further into memory cells.