NK1.1⁺ T cells develop and function through interactions with cell surface CD1 complexes. In I-A^b mice lacking the invariant chain (Ii) processing enzyme, cathepsin S, NK1.1⁺ T cell selection and function are impaired. In vitro, thymic dendritic cells (DCs) from cathepsin S^−/− mice exhibit defective presentation of the CD1-restricted antigen, α-galactosylceramide (α-GalCer). CD1 dysfunction is secondary to defective trafficking of CD1, which colocalizes with Ii fragments and accumulates within endocytic compartments of cathepsin S^−/− DCs. I-A^k, cathepsin S^−/− mice do not accumulate class II-associated Ii fragments and accordingly do not display CD1 abnormalities. Thus, function of CD1 is critically linked to processing of Ii, revealing MHC class II haplotype and cathepsin S activity as regulators of NK T cells.