Genetic modification of endogenous genes in mice has become possible by applying gene targeting techniques to embryonic stem (ES) cells and using specific clones of cells to generate mice. Despite the experimental opportunities offered by the creation of organisms with specific genetic changes, there are considerable technical obstacles which can confound the routine implementation of this technology. This review addresses some recent advances in the ability to construct mice with a variety of genetic modifications. These include an increased understanding of the basic cell biology and in vitro growth characteristics of ES cells, which has facilitated germ line transmission of manipulated clones on a routine basis. The techniques that are used to isolate "targeted" clones of ES cells have been summarized, and the current status of strategies which have been successfully used to make very specific modifications of the genome are discussed.