Massive accumulation of retrotransposons, comprising >40% of human and mouse genomes, is one of the major events in the evolution of the genome. However, most retrotransposons have lost retrotransposition competency, which makes studying their role in genome evolution elusive. Intracisternal A-particle (IAP) elements are long terminal repeat (LTR)-type mouse retrotransposons consisting of full-length and internally deleted types. Some are retrotransposition competent and their upregulated activity has been reported in mutant mice deficient in genome defense systems, suggesting that IAP elements provide a unique platform for studying the interaction between retrotransposons and mammalian genomes. Using the IAP element as a model case, here we show that mobilization of retrotransposons alters the mouse transcriptome. Retrotransposition assay in cultured cells demonstrated that a subset of internally deleted IAP elements, called IDelta1 type, retrotranspose efficiently when supplied with functional IAP proteins. Furthermore, the IDelta1 type IAP element exhibited substantial transcription-inducing activity in the flanking region. Genomewide transcript analysis of embryonic stem (ES) cells identified IAP-induced transcripts, including fusion transcripts between IAP sequence and endogenous genes. Unexpectedly, nearly half of these IAP elements obtained from ES cells derived from 129 mouse strain were absent in the C57BL/6 genome, suggesting that IAP-driven transcription contributes to the unique trait of the individual mouse strain. On the basis of these data, we propose that retrotransposons are one of the drivers that shape the mammalian transcriptome.