The biomedical application of human embryonic stem (hES) cells will increasingly depend on the availability of technologies for highly controlled genetic modification. In mouse genetics, conditional mutagenesis using site-specific recombinases has become an invaluable tool for gain- and loss-of-function studies. Here we report highly efficient Cre-mediated recombination of a chromosomally integrated loxP-modified allele in hES cells and hES cell-derived neural precursors by protein transduction. Recombinant modified Cre recombinase protein translocates into the cytoplasm and nucleus of hES cells and subsequently induces recombination in virtually 100% of the cells. Cre-transduced hES cells maintain the expression of pluripotency markers as well as the capability of differentiating into derivatives of all three germ layers in vitro and in vivo. We expect this technology to provide an important technical basis for analyzing complex genetic networks underlying human development as well as generating highly purified, transplantable hES cell-derived cells for regenerative medicine.