AbstractIntegration of a DNA fragment in a host genome requires the action of a double‐strand break (DSB) repair mechanism. Homologous recombination (HR) is initiated by binding of Rad52p to DNA ends and results in targeted integration. Binding of the Ku heterodimer (Ku70p/Ku80p) results in random integration via non‐homologous end joining (NHEJ). In contrast to Saccharomyces cerevisiae, the budding yeast Kluyveromyces lactis shows variable, but in general low, gene targeting efficiency. To study and to improve gene targeting efficiency, K. lactis has been used as a model. The KlRAD51, KlRAD52 and KlKU80 genes have been isolated and deletion mutants for these genes have been constructed. Efficiency of gene targeting was determined at the KlADE2 locus using targeting constructs with different lengths of homologous flanking sequences. In wild‐type K. lactis, the gene targeting efficiency ranged from 0% with 50 to 88% with 600 bp flanks. The Klku80 mutant, however, showed >97% gene targeting efficiency independently of the size of the homologous flanks. These results demonstrate that deletion of the NHEJ mechanism results in a higher gene targeting efficiency. Furthermore, increased gene targeting efficiency was achieved by the transformation of wild‐type K. lactis with the KlADE2 deletion construct in the presence of excess small DNA fragments. Using this method, PCR‐generated deletion constructs containing only 50 bp of homologous flanking sequences resulted in efficient targeted gene replacement. Copyright © 2004 John Wiley & Sons, Ltd.