In this report we demonstrate primary non-random X chromosome inactivation following targeted mutagenesis of a region immediately upstream of XIST promoter P(1). In heterozygous animals there is a preferential inactivation of the targeted X chromosome in 80--90% of cells. The phenotype correlates with inappropriate activation of XIST in a proportion of the mutant XY embryonic stem cells. Strand-specific analysis revealed increased sense transcription initiating upstream of XIST promoter P(1). There was, however, no discernible effect on transcription from the antisense Tsix gene. We demonstrate that the in vitro and in vivo phenotypes are specifically attributable to the presence of a PGKneo cassette at the targeted locus. These findings are discussed in the context of understanding mechanisms of XIST gene regulation in X inactivation.