It is over a decade since the first demonstration that mouse embryonic stem cells could be used to transfer a predetermined genetic modification to a whole animal. The extension of this technique to other mammalian species, particularly livestock, might bring numerous biomedical benefits, for example, ablation of xenoreactive transplantation antigens, inactivation of genes responsible for neuropathogenic disease and precise placement of transgenes designed to produce proteins for human therapy. Gene targeting has not yet been achieved in mammals other than mice, however, because functional embryonic stem cells have not been derived. Nuclear transfer from cultured somatic cells provides an alternative means of cell-mediated transgenesis. Here we describe efficient and reproducible gene targeting in fetal fibroblasts to place a therapeutic transgene at the ovine alpha1(I) procollagen (COL1A1) locus and the production of live sheep by nuclear transfer.