Now that some genomes have been completely sequenced, the ability to direct specific mutations into genomes is particularly desirable. Here we present a method to create mutations in the Caenorhabditis elegans genome efficiently through transgene-directed, transposon-mediated gene conversion. Engineered deletions targeted into two genes show that the frequency of obtaining the desired mutation was higher using this approach than using standard transposon insertion-deletion approaches. We also targeted an engineered green fluorescent protein insertion-replacement cassette to one of these genes, thereby confirming that custom alleles of different types can be created in vitro to make the corresponding mutations in vivo. This approach should also be applicable to heterologous transposons in C. elegans and other organisms, including vertebrates.