The N‐myc proto‐oncogene is a member of the superfamily of transcription factors. In mammals, expression of this gene is predominantly restricted to the developing embryo. Specifically, the level of expression is highest in differentiating epithelial components of the embryo including those of the developing brain, kidney and lung. The observation that N‐myc is expressed in differentiating but not terminally differentiated structures suggests that these genes may function in the maintenance of cells in a determined or proliferative state. Available evidence suggests that when N‐myc expression is down‐regulated, cells progress through differentiation and acquire their terminal phenotype. N‐myc expression is also correlated with poor prognosis in a number of tumor systems. Since malignant tumors are usually poorly differentiated, this may reflect the role that N‐myc plays in preventing differentiation of otherwise determined cells. In vivo site‐directed mutagenesis by homologous recombination has made it possible to introduce a variety of mutations into mice. This review summarizes this technology and describes our initial results in the characterization of mice that lack a functional N‐myc gene. Specifically, we have observed that in the absence of a functional N‐myc gene, embryos arrest in midgestation. This body of work demonstrates that this gene is not required for normal development until the onset of organogenesis.