A fusion plasmid, pMK, containing the mouse metallothionein-I promoter/regulatory region joined to the structural gene of herpesvirus thymidine kinase, was introduced into mice by microinjection into fertilized eggs followed by reinsertion of the eggs into foster mothers. Fifteen percent (10 of 69) of the mice developing from this procedure carried pMK sequences. Seven of these mice expressed high levels of viral thymidine kinase in the liver. This enzyme is inducible by heavy metals, as indicated by assay of thymidine kinase activity following sequential partial hepatectomies with or without cadmium treatment. However, glucocorticoid treatment has been ineffective in all transgenic mice tested. The pMK sequences are extensively methylated at a variety of restriction sites, indicating the existence of a de novo methylation enzyme. We have analyzed the inheritance of pMK sequences and their expression in several pedigrees. These fusion genes are inherited as though they were integrated into a single chromosome; however, their expression may be extinguished, diminished or enhanced in the offspring relative to that of the parent. In some animals there is a correlation between changes in DNA methylation and expression of these fusion genes.