Bacterial artificial chromosomes (BACs) and P1 artificial chromosomes (PACs), which contain large fragments of genomic DNA, have been successfully used as transgenes to create mouse models of dose-dependent diseases. They are also potentially valuable as transgenes for dominant diseases given that point mutations and/or small rearrangements can be accurately introduced. Here, we describe a new method to introduce small alterations in BACs, which results in the generation of point mutations with high frequency. The method involves homologous recombination between the original BAC and a shuttle vector providing the mutation. Each recombination step is monitored using positive and negative selection markers, which are the Kanamycin-resistance gene, the sacB gene and temperature-sensitive replication, all conferred by the shuttle plasmid. We have used this method to introduce four different point mutations and the insertion of the ss-galactosidase gene in a BAC, which has subsequently been used for transgenic animal production.