Although in vivo models utilizing endogenous reporter genes have been exploited for many years, the use of reporter transgenes to dissect biological issues in transgenic animals has been a relatively recent development. These transgenes are often, but not always, of prokaryotic origin and encode products not normally associated with eukaryotic cells and tissues. Some encode enzymes whose activities are detected in cell and tissue homogenates, whereas others encode products that can be detected in situ at the single cell level. Reporter genes have been used to identify regulatory elements that are important for tissue-specific gene expression or for development; they have been used to produce in vivo models of cancer; they have been employed for the study of in vivo mutagenesis; and they have been used as a tool in lineage analysis and for marking cells in transplantation experiments. The most commonly used in situ reporter gene is lacZ, which encodes a bacterial beta-galactosidase, a sensitive histochemical marker. Although it has been used with striking success in cultured cells and in transgenic mouse embryos, its postnatal in vivo expression has been unreliable and disappointing. Nevertheless, the ability to express reporter genes in transgenic mice has been an invaluable resource, providing insights into in vivo biological mechanisms. The development of new in vivo models, such as those in which expression of transgenes can be activated or repressed, should produce transgenic animal systems that extend our capacity to address heretofore unresolved biological questions.