To examine the mechanism of B cell tolerance against natural peripheral self-antigen, we generated transgenic mice expressing IgM specific for desmoglein 3 (Dsg3) from AK7 monoclonal antibody which itself does not induce blisters. Dsg3 is mainly expressed on stratified squamous epithelium and is the target antigen of an autoimmune bullous disease, pemphigus vulgaris. Transgenic B cells reactive to Dsg3 were observed in the spleen and lymph node. Although these B cells are autoreactive, they did not develop into B1 B cells. These B cells were functionally competent and anti-Dsg3 IgM was detected in the serum and on the keratinocyte cell surface. These results indicate that auto-reactive B cells against peripheral antigen (Dsg3) are able to develop in the presence of Dsg3 but are ignored by the immune system.