Different gene targeting approaches have been developed to modify endogenous genomic DNA in both human and mouse cells. Briefly, the process involves the targeting of a specific mutation in situ leading to the gene correction and the restoration of a normal gene function. Most of these protocols with therapeutic potential are oligonucleotide based, and rely on endogenous enzymatic pathways. One gene targeting approach, "Small Fragment Homologous Replacement (SFHR)", has been found to be effective in modifying genomic DNA. This approach uses small DNA fragments (SDF) to target specific genomic loci and induce sequence and subsequent phenotypic alterations. This study shows that SFHR can stably introduce a 3-bp deletion (deltaF508, the most frequent cystic fibrosis (CF) mutation) into the Cftr (CF Transmembrane Conductance Regulator) locus in the mouse embryonic stem (ES) cell genome. After transfection of deltaF508-SDF into murine ES cells, SFHR-mediated modification was evaluated at the molecular levels on DNA and mRNA obtained from transfected ES cells. About 12% of transcript corresponding to deleted allele was detected, while 60% of the electroporated cells completely lost any measurable CFTR-dependent chloride efflux. The data indicate that the SFHR technique can be used to effectively target and modify genomic sequences in ES cells. Once the SFHR-modified ES cells differentiate into different cell lineages they can be useful for elucidating tissue-specific gene function and for the development of transplantation-based cellular and therapeutic protocols.