Bacterial artificial chromosome clones (BACs) are widely used at present in human genome physical mapping projects. To extend the utility of these clones for functional genomic studies, we have devised a method to modify BACs using Cre recombinase to introduce a gene cassette into the loxP sequence, which is present in the vector portion of the BAC clone. Cre-mediated integration is site specific and thus maintains the integrity of the genomic insert sequences, while eliminating the steps that are involved in restriction digest-based DNA cloning strategies. The success of this method depends on the use of a DNA construct, RETRObac, which contains the reporter marker green fluorescent protein (GFP) and the selectable marker neomycin phosphotransferase (neo), but does not contain a bacterial origin of replication. BAC clones have been modified successfully using this method and the genomic insert shows no signs of deletions or rearrangements. Transfection efficiencies of the modified BACs into human or murine cell lines ranged from 1% to 6%. After culture in media containing G418 for 3 weeks, approximately 0. 1% of cells previously sorted for GFP expression acquired stable antibiotic resistance. Introduction of a human BAC clone that contains genomic p53 sequences into murine NIH3T3 cells led to expression of human p53 mRNA as determined by RT-PCR, demonstrating that sequences contained on the BAC are expressed. We believe that GFP-neo modified BAC clones will be a valuable resource in efforts to study biological effects of known genes as well as in efforts to clone and analyze new genes and regulatory regions.