We have developed a strategy for chromosome engineering in embryonic stem (ES) cells that relies on sequential gene targeting and Cre-loxP site-specific recombination. Gene targeting was first used to integrate loxP sites at the desired positions in the genome. Transient expression of Cre recombinase was then used to mediate the chromosomal rearrangement. A genetic selection relying on reconstruction of a selectable marker from sequences co-integrated with the loxP sites allowed detection of cells containing the Cre-mediated rearrangement. A programmed translocation between the c-myc and immunoglobulin heavy chain genes on chromosomes 15 and 12 was created by this method. This strategy will allow the design of a variety of chromosome rearrangements that can be selected and verified in ES cells or activated in ES cell-derived mice.