Over the past decade, the development of gene-transfer technology in whole animals has afforded unprecedented opportunities for investigators to probe complex regulatory systems in vivo. Important advances in our understanding of the mechanisms of gene expression and regulation and the development of animal models of human diseases are but two examples of how this technology has affected medical science. Transgenic animals are defined as animals in which a segment of DNA has been physically integrated into the genome of all cells, including the germ line, so that it can be transmitted to offspring as a simple Mendelian trait. The DNA segment generally consists of a whole cloned gene, cDNA, or a novel gene modified by recombinant DNA methodologies. Whole genomic clones of genes are often used to study tissue- and cell-specific expression and regulation or can be used to overexpress a gene product. Alternatively, the coding region of one gene can be fused to the transcriptional regulatory region of another gene, causing it to be expressed in a new spectrum of tissues and cell types. A number of methods can be used to introduce the DNA segment, including direct microinjection of one-cell fertilized embryos, retroviral-mediated transfer, or gene transfer in embryonic stem cells. The technique most often used to generate transgenic animals and perform "gene addition" experiments is direct microinjection. Alternatively, gene deletions or "knockouts" are performed by gene transfer in embryonic stem cells by specifically targeting the site of integration in the genome.(ABSTRACT TRUNCATED AT 250 WORDS)