Site specific recombinases have provided the experimental strategy necessary to modulate the expression of gene products in the mouse embryo. In this study we have exploited Cre recombinase to develop a widely applicable cell marking system which functions efficiently even at early post-implantation embryonic stages. Importantly, the techniques and reagents derived in this study are generally applicable to any recombinase driven approach, including strategies to temporally and spatially modulate endogenous or ectopic gene expression in the embryo. The cell marking scheme has two essential components which were derived as separate mouse lines. The first line carries a universal conditional lacZ reporter (UCR) locus which was prepared by using gene targeting in a novel approach to modify a ubiquitously expressed retroviral lacZ promoter trap insertion. The UCR locus is silent until it undergoes a Cre mediated DNA rearrangement to restore lacZ expression. To generate the Cre expressing allele, we outline a flexible strategy which requires the introduction of a novel IRES-Cre cassette into exon sequence of an endogenous locus by gene targeting. We successfully demonstrate this approach by generating a Cre expressing allele of the EphA2 gene, an Eph receptor protein tyrosine kinase expressed early in development. Analysis of double heterozygote embryos clearly demonstrates that Cre recombinase is expressed in vivo from the EphA2 IRES-Cre allele, and that the conditional reporter locus is efficiently restored in EphA2-expressing cells as early as 7.5 dpc. This cell marking experiment establishes the feasibility of expressing Cre recombinase from a single copy allele in the embryo and demonstrates the utility of the conditional reporter mouse which can be used in the analysis of any Cre expressing allele.