A two-marker selection system that allows the efficient isolation of diploid gene knockouts by two sequential rounds of targeted homologous recombination has been developed. A systematic evaluation of the biological parameters that govern the selection process showed that a successful strategy must match the expression level of the target gene, the efficacy of the marker, and the selection stringency. An enrichment ratio of 5,000- to 10,000-fold, which resulted in a 30% targeting efficiency of the c-myc gene in a fibroblast cell line, has been achieved. Such efficiency brings the difficulty of gene targeting effectively down to the level of simple transfections, since only 10 to 20 drug-resistant clones need to be screened to recover several homologous hits. The general utility of the targeting strategy is of interest to investigators studying gene function in a large variety of mammalian tissue culture systems.