1. Construction of transgenic mice is predicated upon inserting foreign DNA into native host DNA and having this expressed in the germline. This may be accomplished by nuclear injection, retroviral vectors or use of embryonic stem (ES) cells. 2. Expression of novel structural genes may be reasonably directed by the judicious use of an accompanying promoter/enhancer sequence. Insertion of foreign genes may be designed to result in phenotypic expression of a novel trait or ablation of a native gene or gene product. 3. Resulting transgenic mice offer significant utility as models of human diseases and a unique opportunity for investigating immune and metabolic pathways as well as for exploring mechanisms of development, mutagenesis and teratogenesis. 4. Use of transgenic animals in drug development has considerable potential although realization of this potential will take time. Constructing transgenics is only the first step in a complex series of events culminating in understanding the consequences of imposing novel genetic material on an intact, highly integrated living system. Practical use of transgenic animals will depend upon substantial effort being spent in investigating and validating the phenotypic consequences of gene transfer.