After sequencing the human and mouse genomes, the annotation of these sequences with biological functions is an important challenge in genomic research. A major tool to analyse gene function on the organismal level is the analysis of mutant phenotypes. Because of its genetic and physiological similarity to man, the mouse has become the model organism of choice for the study of genetic diseases. In addition, there is at the moment no other vertebrate for which versatile techniques to manipulate the genome are as well developed. Several mouse mutagenesis projects have provided the proof-of-principle that a systematic and comprehensive mutagenesis of every gene in the mammalian genome will be feasible. An exhaustive functional annotation of the mammalian genome can only be achieved in a combination of phenotype- and gene-driven approaches in large- and small-scale academic and private projects. Major challenges will be to develop standardised phenotyping protocols for the clinical and pathological characterisation of mouse mutants, the improvement of mutation detection methods and the dissemination of resources and data. Beyond gene annotation, it will be necessary to understand how gene functions are integrated into the complex network of regulatory interactions in the cell.