The recombination-activating genes (RAG) 1 and 2 are indispensable for diversifying the primary B cell receptor repertoire and pruning self-reactive clones via receptor editing in the bone marrow; however, the impact of RAG1/RAG2 on peripheral tolerance is unknown. Partial RAG deficiency (pRD) manifesting with late-onset immune dysregulation represents an 'experiment of nature' to explore this conundrum. By studying B cell development and subset-specific repertoires in pRD, we demonstrate that reduced RAG activity impinges on peripheral tolerance through the generation of a restricted primary B cell repertoire, persistent antigenic stimulation and an inflammatory milieu with elevated B cell-activating factor. This unique environment gradually provokes profound B cell dysregulation with widespread activation, remarkable extrafollicular maturation and persistence, expansion and somatic diversification of self-reactive clones. Through the model of pRD, we reveal a RAG-dependent 'domino effect' that impacts stringency of tolerance and B cell fate in the periphery.