It would be extremely advantageous to the analysis of disease mechanisms in the spontaneous mouse model of type 1 diabetes, the nonobese diabetic (NOD) strain, if genes in this strain could be modified in vivo using embryonic stem (ES) cells and homologous recombination. However, a NOD ES cell line with adequate germline transmission has not yet been reported. We report the development of highly germline-competent ES cell lines from the F1 hybrid of NOD and 129 for use in NOD gene targeting. Consequently, we developed ES cell lines derived from (NOD x 129)F1 x 129 backcross 1 mice, which were intercrossed to select for homozygosity of particular regions of NOD genome known to contain disease loci.