A retroviral gene trap vector (U3Tkneo) that selects for integrations in or near expressed 5' exons has been used to identify genes that are repressed during hematopoietic differentiation of mouse totipotent embryonic stem cells. The vector contains coding sequences for an HSV-thymidine kinase/neomycin phosphotransferase fusion protein in the U3 region of a Moloney murine leukemia virus LTR and allows selection for (G418) and against (Ganciclovir; GC) U3 gene expression. A total of 208 neomycin-resistant clones were isolated following infection with U3tkneo and screened for integrations into regulated genes by using a two-step, semisolid culture system that supports hematopoietic differentiation. Two clones contained U3Tkneo integrations in genes that were repressed selectively in hematopoietic cells. Analysis of upstream proviral flanking sequences indicated that both integrations occurred into unknown genes. One up-stream sequence identified a cellular transcript that was expressed differentially in the kidneys and liver of adult mice. When this fusion gene was passaged to the germ line, homozygous offspring with nearly null mutations were obtained. However, mutant mice were normal, suggesting that potential loss of function phenotypes are subtle and may be restricted to the kidneys and the liver.