Antibody VH transgenes containing small amounts of natural 5' and 3' flanking DNA undergo nonreciprocal homologous recombination with the endogenous Igh locus in B cells. The resulting "hybrid" heavy chain loci are generated at a low frequency but are fully functional, undergoing somatic hypermutation and isotype class switching. We have used this recombination pathway to introduce a somatically mutated variable (V) region with an unusually high affinity for the hapten p-azophenylarsonate (Ars) into the preimmune antibody repertoire. The affinity of this V region for Ars is 100-fold higher than any unmutated anti-Ars antibody previously characterized. Expression of the transgene-encoded V region did not affect many aspects of antigen-driven B cell differentiation, including somatic hypermutation, in either Ars-specific transgene- or endogenous V gene-expressing clones. Thus, the regulation of these processes appears to operate in a "global" fashion, in that the mechanisms involved are imperceptive of the relative affinities for antigen of the antibodies expressed by B cell clones participating in the immune response. In contrast, the selection of V region mutants leading to affinity maturation and memory cell formation was found to be strongly influenced by the transgenic V region, but only in clones expressing this V region. Hybridomas derived from transgene- and endogenous V region-expressing memory cells were isolated at similar frequencies from individual transgenic mice. The V regions expressed by hybridomas in both of these groups had 2- to 30-fold greater affinity for Ars than their unmutated precursors, despite the fact that the transgene-encoded precursors had 100-fold higher affinity than their endogenous counterparts. These results show that the criterion for entry into the memory compartment is established not by the affinity of a B cell's V region relative to all other V regions expressed during the response, but by the affinity of this V region relative to its unmutated precursor. Thus, the development of B cell memory is regulated in a "clone-autonomous" fashion.