The development of nuclear transfer from tissue culture cells in livestock made it possible in principle to produce animals with subtle, directed genetic changes by in vitro modification of nuclear donor cells. In the short period since nuclear transfer was first performed, gene targeting in livestock has become a reality. Although gene targeting has immediate potential in biotechnology, it is unclear whether there are practical agricultural applications, at present. The first livestock targeting experiments have been directed at engineering animals either to render their organs immunologically compatible for human transplantation, or for improving the commercial production of recombinant proteins in the transgenic mammary gland. All successful examples of targeting have involved target loci that are expressed in the nuclear donor cell line. Two important barriers to the further development of this technology are adapting protocols for non-expressed genes and modifying procedures to enhance the lifespan of targeted cells in vitro. This review provides data that illustrate the difficulty in targeting non-expressed genes and discusses some of the practical issues associated with providing targeted nuclear donor cells that are competent for nuclear transfer.