Alteration of the mouse genome through homologous recombination in embryonic stem (ES) cells is the most accurate and versatile way to dissect gene function in a vertebrate model. Most often, a selectable marker is used to create a knockout allele by replacing an essential part of the gene. However, knockout strategies are limited because the mutation is present constitutively. Conditional approaches based on the Cre‐loxP site‐specific recombination (SSR) system address this limitation; however, it requires that all parts of the targeted gene remain in ES cells. Here we report success with a “knockout‐first” strategy that ablates gene function by insertion of RNA processing signals without deletion of any of the target gene. Incorporation of site‐specific recombination target sites creates a multipurpose allele for both knockout and conditional applications. genesis 38:151–158, 2004. © 2004 Wiley‐Liss, Inc.