Mutant strains of mice with precise genetic mutations generated by gene-targeting technology have proved to be useful tools for linking specific genes with biological processes in vivo and serve as models for human diseases. Pituitary adenylate cyclase-activating polypeptide (PACAP) is a highly conserved neuropeptide that is widely expressed in the mammalian brain, and it has been implicated in a broad variety of physiological and pathophysiological processes. To assess the function of PACAP in vivo, recently, we have generated PAC1 receptor- and PACAP-targeted mice and transgenic mice overexpressing PACAP in the pancreatic beta-cells. The phenotypes of these mutant mice revealed both expected and unexpected roles of PACAP in the brain and pancreatic functions. A significant contribution of genetic background as well as environmental factors to the knockout phenotypes was also observed. In this article, we briefly describe the technique of gene targeting and discuss how this method was used to generate PACAP and its receptor deficient mice. We also analyze how these mutants can contribute to our understanding of the molecular mechanism underlying higher nervous functions.