We have previously shown that pluripotent stem cells can be induced from mouse fibroblasts by retroviral introduction of Oct3/4 (also called Pou5f1), Sox2, c-Myc and Klf4, and subsequent selection for Fbx15 (also called Fbxo15) expression. These induced pluripotent stem (iPS) cells (hereafter called Fbx15 iPS cells) are similar to embryonic stem (ES) cells in morphology, proliferation and teratoma formation; however, they are different with regards to gene expression and DNA methylation patterns, and fail to produce adult chimaeras. Here we show that selection for Nanog expression results in germline-competent iPS cells with increased ES-cell-like gene expression and DNA methylation patterns compared with Fbx15 iPS cells. The four transgenes (Oct3/4, Sox2, c-myc and Klf4) were strongly silenced in Nanog iPS cells. We obtained adult chimaeras from seven Nanog iPS cell clones, with one clone being transmitted through the germ line to the next generation. Approximately 20% of the offspring developed tumours attributable to reactivation of the c-myc transgene. Thus, iPS cells competent for germline chimaeras can be obtained from fibroblasts, but retroviral introduction of c-Myc should be avoided for clinical application.