At present, the limitation of Phenotype-based genetic screening in embryonic stem cells (ESCs) is the diploid nature of the genome. Since it is known that cells deficient in the Bloom's syndrome gene (Blm) show an increased rate of homologous recombination, we have developed a new system to conditionally regulate the Blm allele for introduction of bi-allelic mutations across the genome. Transient deficiency of Blm induces homologous recombination not only between sister chromatids but also between homologous chromosomes, resulting in a high rate of loss of heterozygosity (LOH). Introduction of genome-wide mutations in ESCs can be achieved by retroviral vector. In combination, using genome-wide mutagenesis and transient loss of Blm expression, we have generated ES libraries with bi-allelic mutations. These results show that this new system is very efficient for identifying gene functions in ESCs.