The thymus represents an epithelial–mesenchymal tissue, anatomically structured into discrete cortical and medullary regions that contain phenotypically and functionally distinct stromal cells, as well as thymocytes at defined stages of maturation. The stepwise progression of thymocyte development seems to require serial migration through these distinct thymic regions, where interactions with cortical thymic epithelial cell (cTEC) and medullary thymic epithelial cell (mTEC) subsets take place. Recent work on TEC subsets provides insight into T cell development and selection, such as the importance of tumour necrosis factor (TNF) receptor superfamily members in thymus medulla development, and the specialised antigen processing/presentation capacity of the thymic cortex for positive selection. Here, we summarise current knowledge on the development and function of the thymic microenvironment, paying particular attention to the cortical and medullary epithelial compartments.