Germ-line mutations in the human adenomatous polyposis coli (APC) gene result in familial adenomatous polyposis, an autosomal dominant disorder characterized by the early onset of multiple adenomatous polyps in the large bowel with a high likelihood of developing colorectal carcinomas. To understand the role of APC in intestinal tumor formation, we have introduced a chain-termination mutation in the 15th exon of the mouse Apc gene and employed it to modify the endogenous gene by homologous recombination in embryonic stem cells. Mice which are heterozygous for the Apc gene modification progressively develop intestinal tumors in a manner that is similar to that observed in patients with familial adenomatous polyposis and in mice which carry a mutation called multiple intestinal neoplasia (Min). Our results indicate that the Apc gene modification is a critical event in the initiation of intestinal tumor formation and results in an autosomal dominant predisposition toward development of spontaneous colonic and intestinal tumors in mice.