The prevalent view of thymic epithelial differentiation and Aire activity holds that Aire functions in terminally differentiated medullary thymic epithelial cells (MTECs) to derepress the expression of structural tissue-restricted Ags, including pancreatic endocrine hormones. An alternative view of these processes has proposed that Aire functions to regulate the differentiation of immature thymic epithelial cells, thereby affecting tissue-restricted Ag expression and negative selection. In this study, we demonstrate that Aire impacts several aspects of murine MTECs and provide support for this second model. Expression of transcription factors associated with developmental plasticity of progenitor cells, Nanog, Oct4, and Sox2, by MTECs was Aire dependent. Similarly, the transcription factors that regulate pancreatic development and the expression of pancreatic hormones are also expressed by wild-type MTECs in an Aire-dependent manner. The altered transcriptional profiles in Aire-deficient MTECs were accompanied by changes in the organization and composition of the medullary epithelial compartment, including a reduction in the medullary compartment defined by keratin (K) 14 expression, altered patterns of K5 and K8 expression, and more prominent epithelial cysts. These findings implicate Aire in the regulation of MTEC differentiation and the organization of the medullary thymic compartment and are compatible with a role for Aire in thymic epithelium differentiation.