Chromosomal deletions, as a genetic tool for functional genomics, remain underexploited for vertebrate stem cells mostly because presently available methods are too labor-intensive. To address this, we developed and validated a set of complementary retroviruses that creates a wide range of nested chromosomal deletions. When applied to mouse embryonic stem cells (ESCs), this retrovirus-based method yielded deletions ranging from 6 kb to 23 Mb (average 2.9 Mb), with an efficiency of 64% for drug-selected clones. Notably, several of the engineered ESC clones, mostly those with large deletions, showed major alteration in cell fate. In comparison to other methods that have also exploited retroviruses for chromosomal engineering, this modified strategy is more efficient and versatile because it bypasses the need for homologous recombination, and thus can be exploited for rapid and extensive functional screens in embryonic and adult stem cells.