We have developed a system of recipient strains and donor plasmids that allows targeting of DNA sequences to the am locus of Neurospora crassa. A recipient strain was constructed that contains the 3' two-thirds of the bacterial Hygromycin B (Hy) phosphotransferase-encoding gene (hph) in single copy downstream from the am structural gene encoding NADP-specific glutamate dehydrogenase. Plasmids have been constructed that contain am, but with the 5' end of hph downstream from am. Resistance to Hy can occur during transformation only if recombination occurs within the region of overlap of the hph sequences from the transforming DNA and of the chromosomal hph sequences. A lacZ alpha gene with a multiple cloning site has been inserted into the region between the am and hph sequences to facilitate subcloning into the targeting vector. Additionally, unique sites at the junctions of the vector and targeting DNA allow easy removal of vector sequences prior to transformation. A second recipient strain has been constructed that has had the am structural gene deleted. This strain may be used to provide a double selection for homologous integration. Additionally, this strain facilitates replacement of am with heterologous constructs, including constructs that drive transcription of am with different promoters. The insertion of hph downstream from am has no apparent effect on am expression, and the resistance segregates as a Mendelian factor in crosses. Transformation efficiency is reduced two to three orders of magnitude, but interestingly, nearly all of the resistant strains have only a single copy of the transforming DNA.