Identification of gene function has often relied on isolation of mutant cells in which expression of the gene was inactivated. Gene targeting by homologous recombination in tissue culture now may provide a technology to rapidly and directly produce such mutant mammalian cells. We demonstrate that selection of embryonic stem and pre-B cell lines for expression of a promoterless construct containing murine N-myc genomic sequences fused to a gene encoding neomycin resistance allows highly efficient recovery of variants in which the endogenous N-myc gene is disrupted. The high frequency of N-myc gene disruption by this method should permit targeted disruption of both allelic N-myc copies in various cell lines to study N-myc function.