To accelerate gene isolation from plants by positional cloning, vector systems suitable for both chromosome walking and genetic complementation are highly desirable. Therefore, we developed a transformation-competent artificial chromosome (TAC) vector, pYLTAC7, that can accept and maintain large genomic DNA fragments stably in both Escherichia coli and Agrobacterium tumefaciens. Furthermore, it has the cis sequences required for Agrobacterium-mediated gene transfer into plants. We cloned large genomic DNA fragments of Arabidopsis thaliana into the vector and showed that most of the DNA fragments were maintained stably. Several TAC clones carrying 40- to 80-kb genomic DNA fragments were transferred back into Arabidopsis with high efficiency and shown to be inherited faithfully among the progeny. Furthermore, we demonstrated the practical utility of this vector system for positional cloning in Arabidopsis. A TAC contig was constructed in the region of the SGR1 locus, and individual clones with ca. 80-kb inserts were tested for their ability to complement the gravitropic defects of a homozygous mutant line. Successful complementation enabled the physical location of SGR1 to be delimited with high precision and confidence.