Embryonic stem cells isolated directly from mouse embryos can be cultured for long periods in vitro and subsequently repopulate the germ line in chimaeric mice. During the culture period these embryonic cells are accessible for experimental genetic manipulation. Here we report the use of retroviral vectors to introduce exogenous DNA sequences into a stem-cell line and show that these modified cells contribute extensively to the somatic and germ-cell lineages in chimaeric mice. Compared with current methods for manipulation of the mouse genome, this approach has the advantage that powerful somatic-cell genetic techniques can be used to modify and to select cells with germ-line potential, allowing the derivation of transgenic strains with pre-determined genetic changes. We have by this means inserted many proviral vector sequences that provide new chromosomal molecular markers for linkage studies in the mouse and that also may cause insertional mutations.