The development of transgenesis in axolotls is crucial for studying development and regeneration as it would allow for long-term cell fate tracing as well as gene expression analysis. We demonstrate here that plasmid injection into the one-cell stage axolotl embryo generates mosaic transgenic animals that display germline transmission of the transgene. The inclusion of SceI meganuclease in the injections (Thermes, V., Grabher, C., Ristoratore, F., Bourrat, F., Choulika, A., Wittbrodt, J., Joly, J.S., 2002. I-SceI meganuclease mediates highly efficient transgenesis in fish. Mech. Dev. 118, 91-98) resulted in a higher percentage of F0 animals displaying strong expression throughout the body. This represents the first demonstration in the axolotl of germline transmission of a transgene. Using this technique we have generated a germline transgenic animal expressing GFP ubiquitously in all tissues examined. We have used this animal to study cell fate in the dorsal fin during development. We have uncovered a contribution of somite cells to dorsal fin mesenchyme in the axolotl, which was previously assumed to derive solely from neural crest. We have also studied the role of blood during tail regeneration by transplanting the ventral blood-forming region from GFP+ embryos into unlabeled hosts. During tail regeneration, we do not observe GFP+ cells contributing to muscle or nerve, suggesting that during tail regeneration blood stem cells do not undergo significant plasticity.