Dendritic cells (DCs) have the unique capacity to initiate primary and secondary immune responses. They acquire antigens in peripheral tissues and migrate to lymphoid organs where they present processed peptides to T cells. DCs must therefore exist in distinct functional states, an idea that is supported by observations that they downregulate endocytosis and upregulate surface molecules of the class II major histocompatibility complex (MHC) upon maturation. Here we investigate the features of DC maturation by reconstituting the terminal differentiation of mouse DCs in vitro and in situ. We find that early DCs, corresponding to those found in peripheral tissues, exhibit a phenotype in which most class II molecules are intracellular and localized to lysosomes. Upon maturation, these cells give rise to a new intermediate phenotype in which intracellular class II molecules are found in peripheral non-lysosomal vesicles, similar to the specialized CIIV population seen in B cells. The intermediate cells then differentiate into late DCs which express almost all of their class II molecules on the plasma membrane. These variations in class II compartmentalization are accompanied by dramatic alterations in the intracellular transport of the new class II molecules and in antigen presentation. We found that although early DCs could not present antigen immediately after uptake, efficient presentation of the previously internalized antigen occurred after maturation, 24-48 hours later. By regulating class II transport and compartmentalization, DCs are able to delay antigen display, a property crucial to their role in immune surveillance.