While DNA excision by Cre-loxP homologous recombination has been exploited for mammalian genetic engineering, it has not been reported whether DNA inversion is achievable by the same mechanism in mammalian cells. To investigate whether Cre-loxP-mediated DNA inversion takes place in mammalian cells, a novel retroviral vector, NT(FF), was constructed. The vector carries a marker gene cassette consisting of the neo and tk genes linked tail-to-tail to each other and flanked by an inverted repeat of loxP sequences. In NT(FF)-transduced Rat2 cells, the marker gene cassette was inverted reversibly in a Cre-dependent manner, leading to DNA "flip-flop" associated with alternate expression of the neo and tk genes. This study provides the first example of Cre-loxP-mediated DNA inversion in mammalian cells facilitating regulation of retrovirally transduced genes, suggesting the usefulness of the system for genetic engineering. (C) 1998 Academic Press.