Murine animal models from genetically modified pluripotent stem cells (PSCs) are essential for functional genomics and biomedical research, which require germline transmission for the establishment of colonies. However, the quality of PSCs, and donor-host cell competition in chimeras often present strong barriers for germline transmission. Here, we report efficient germline transmission of recalcitrant PSCs via blastocyst complementation, a method to compensate for missing tissues or organs in genetically modified animals via blastocyst injection of PSCs. We show that blastocysts from germline-deficient Prdm14 knockout rats provide a niche for the development of gametes originating entirely from the donor PSCs without any detriment to somatic development. We demonstrate the potential of this approach by creating PSC-derived Pax2/Pax8 double mutant anephric rats, and rescuing germline transmission of a PSC carrying a mouse artificial chromosome. Furthermore, we generate mouse PSC-derived functional spermatids in rats, which provides a proof-of-principle for the generation of xenogenic gametes in vivo. We believe this approach will become a useful system for generating PSC-derived germ cells in the future.