A neomycin resistance (neo) gene driven by the phosphoglycerokinase (PGK) promoter was inserted into the Hoxd-10 homeobox by homologous recombination in embryonic stem (ES) cells. Chimeric mice derived from ES cell-injected blastocysts died shortly after birth. Craniofacial and axial abnormalities were found in the skeleton of these chimeras, resembling some of the previously described Hox gene gain-of-function phenotypes. The spatial expression patterns of various Hoxd gene transcripts were analysed in chimeric mutant embryos by in situ hybridization. Two main observations were made: (1) a wide ectopic expression domain of the Hoxd-9 gene was found in the spinal cord of these embryos, and (2) the neo gene exhibited a specific Hox-like expression domain which extended far more rostrally than that of the Hoxd-10 gene, showing that, in the context of this mutation, the PGK promoter could be regulated as a Hox promoter. These results provide the first evidence that a targeted insertion into a Hox gene coding sequence, in the context of its own cluster, could result in misexpression of a neighbour gene of the complex.