The ability to grow pluripotent mouse embryonic stem cells in culture, and to introduce precise genetic modifications into those cells through gene targeting, has greatly facilitated the generation of mouse models of human disease. This technology is playing a particularly important role in cancer research. In addition to their use in elucidating the role of individual genes or combinations of 2 or more genes, the genetically engineered mouse models are being used to develop biomarkers and for preclinical drug testing. By examining plasma samples from tumor-bearing mice from mice carrying specific mutations in tumor suppressor genes and/or oncogenes, investigators can identify tumor-specific biomarkers that are overexpressed in the tumor cells. These markers are directly relevant to the corresponding human cancer. The ability to generate tumors at the correct anatomical site within the normal cellular environment is augmenting the use of xenografts in drug testing in a preclinical setting.