Double-strand breaks (DSBs) are recombinogenic lesions in chromosomal DNA in yeast, Drosophila and Caenorhabditis elegans. Recent studies in mammalian cells utilizing the I-Scel endonuclease have demonstrated that in some immortalized cell lines DSBs in chromosomal DNA are also recombinogenic. We have now tested embryonic stem (ES) cells, a non-transformed mouse cell line frequently used in gene targeting studies. We find that a DSB introduced by I-Scel stimulates gene targeting at a selectable neo locus at least 50-fold. The enhanced level of targeting is achieved by transient expression of the I-Scel endonuclease. In 97% of targeted clones a single base pair polymorphism in the transfected homologous fragment was incorporated into the target locus. Analysis of the targeted locus demonstrated that most of the homologous recombination events were 'two-sided', in contrast to previous studies in 3T3 cells in which 'one-sided' homologous events predominated. Thus ES cells may be more faithful in incorporating homologous fragments into their genome than other cells in culture.