The correlation between phytohemagglutin in (PHA) induced blast cell transformation (BCT) and production of lymphotoxin (LT), a cytotoxic mediator of cellular immunity, was studied in the cord blood lymphocytes of 17 normal newborns. Twelve normal adults served as controls. BCT was estimated as uptake of 3-H-thymidine, and LT as the percent inhibition of DNA synthesis of growing target cells. BCT by newborn lymphocytes was slightly greater than that of adults. By contrast, LT production by the newborns was only 40 that of the adults. Calculation of an “LT Index” (ratio of LT production to BCT) revealed that for any degree of BCT, newborn lymphocytes produced only one-fourth as much LT as did adult cells. In 6 infants, the percent of lymphocytes forming rosettes with sheep red cells (T-cell rosettes) averaged 80% (range 63-90%), which is comparable to that of adults. The combination of impaired mediator production with normal BCT represents a dissociation of lymphocyte function which appears to be a stage in the normal maturation of cellular immune competence. This may, in part, explain the undue susceptibility of newborn infants to certain mycobacterial, fungal and viral infections.