The possibility of utilizing mouse teratocarcinoma stem cells as intermediaries for production of new strains of mice with preselected mutant or foreign genes requires that, after propagation in culture (to allow for genetic manipulation and selection), the cells be capable of normalization and orderly development in carrier embryos and, ultimately, of germ-cell formation. Heretofore, no in vitro cell line has fulfilled all these requirements. A karyotypically normal teratocarcinoma culture line was recently established in this laboratory and now has been investigated as a candidate. The line, designated METT-1, is chromosomally female (X/X) and was obtained from the 129 (agouti-colored) inbred strain [Mintz, B. & Cronmiller, C. (1981) Somat Cell Genet 7, 489-505]. The developmental potential of these cells was tested, after prolonged culture and freezing and thawing, by microinjecting them into early (blastocyst stage) embryos of the C57BL/6 (black) strain. Among 312 experimental animals examined at 1 week of age, there were 41 mice (21 females and 20 males) that displayed the coat colors of both strains. This frequency (13%), as well as the extent of the coat areas derived from the cell line, greatly surpasses the contributions observed in all previous experiments, whether with other in vitro teratocarcinoma cell lines or with in vivo transplant lines. The developmental totipotency of METT-1 cells became evident from the presence of substantial amounts of 129-strain cells (bearing an isozyme marker) in all internal tissues of an individual whose coat was largely agouti. The culture-cell lineage also proved to be capable of giving rise to reproductively functional oocytes. Of nine mosaic-coat females testmated to C57BL/6 males, one produced progeny of the diagnostic agouti color in two litters; these heterozygous F(1) offspring in turn transmitted their marker genes to F(2) homozygous segregants. Thus, the METT-1 teratocarcinoma line bridges the gap between in vitro cell propagation and in vivo development and between the soma and the germ line. This creates the option of producing new mouse strains with predetermined genetic changes designed as probes of developmental regulation or as models of human genetic diseases.