The design of a novel transgenic mouse model is described that should allow analysis of mutations at a single cell level in all tissues of a model animal. The model is based on the correct regulation of the Escherichia coli lac operon in mammalian cells. Induction of a mutation in the lacI gene will result in the loss of transcriptional repression of the lacZ gene in mutated cells. Expression of β-galactosidase can subsequently be detected at the single cell level. The model was first tested in vitro using transfection of mouse LTK− cells. LacZ expression was very heterogeneous in most of the stable transfectants and seemed to be subject to epigenetic inactivation. One clone (IIB1) was isolated that stably expressed lacZ in more than 99% of its cells. Subsequent introduction of the lacI gene into IIB1 cells resulted in correct transcriptional repression of the lacZ gene that could be alleviated by IPTG, an allosteric inducer of lacI repression. However, in time the extent of β-galactosidase induction gradually declined suggesting that the prolonged repressed transcriptional state triggers epigenetic inactivation. Variegated expression of the lacZ gene was not confined to cultured cells since several transgenic lines also did not express the lacZ transgene. This study shows that while the susceptibility of the lacZ gene to inactivation processes poses a fundamental problem, correct regulation of the expression of a reporter gene by the lacI repressor protein is feasible in mammalian cells when assayed at the single cell level. Thus, the model can in principle be used for the detection of mutagenic events at the lacI locus. Targeting of the lacZ gene to an endogenous housekeeping gene might prevent epigenetic inactivation. Alternatively, with the use of another reporter gene in the mutation detection system the proposed transgenic mouse model could be realized.