The development of methods for introduction of foreign DNA stably into genome of experimental animals has opened new possibilities to study the effects of mutations in complex gene-protein systems at the level of the entire organism. Information from such experiments is directly applicable to understanding of pathogenetic mechanisms in hereditary diseases and to designing of new therapeutic approaches. Techniques are currently available for studying both dominant mutations, introduced usually by microinjection, and recessive mutations introduced by homologous recombination employing the pluripotent embryonic stem cells. It remains to be emphasized, however, that the information which can be obtained with these techniques is optimal when sufficient background information is available on the protein system in question. The purpose of this review is to describe how the transgenic mouse methodology has increased our understanding of molecular basis of diseases both at the level of protein function and gene regulation.