We have generated eight lines of transgenic mice containing mouse vasopressin-beta-galactosidase fusion constructs. One of these lines, VGA-9, harbors approximately 50 transgene copies at a single chromosomal site. When bred to transgene homozygosity, mice of this line showed a complete loss of skin pigmentation, microphthalmia, and cochlear abnormalities. The vascular stria of the cochlea was thin and deficient in melanin pigment which is normally produced by presumably neural crest-derived melanocytes. The marginal cells of the stria were thin and lacked basal infoldings. Degeneration of outer hair cells was also observed in homozygous mice, but this alteration may be secondary to the strial abnormalities. In contrast to homozygous VGA-9 mice, heterozygous VGA-9 mice were pigmented and appeared to have no anatomical alterations in either eye or cochlea. Since the integrated transgene provides a marker for cloning an endogenous gene necessary for normal pigmentation and proper development of the inner ear, the transgenic line VGA-9 may become valuable for the study of the molecular genetics of inner ear disorders associated with pigment abnormalities in both mice and humans.