Nuclear transfer offers a cell-based route for producing precise genetic modifications in a range of animal species. Using sheep, we report reproducible targeted gene deletion at two independent loci in fetal fibro-blasts. Vital regions were deleted from the alpha(1,3)galactosyl transferase (GGTA1) gene, which may account for the hyperacute rejection of xenografted organs, and from the prion protein (PrP) gene, which is directly associated with spongiform encephalopathies in humans and animals. Reconstructed embryos were prepared using cultures of targeted or nontargeted donor cells. Eight pregnancies were maintained to term and four PrP-/+ lambs were born. Although three of these perished soon after birth, one survived for 12 days. These data show that lambs carrying targeted gene deletions can be generated by nuclear transfer.