Zinc finger nucleases (ZFNs) are chimeric proteins composed of a zinc finger DNA recognition domain fused to a nonspecific endonuclease domain. The double-strand break (DSB) produced can then be repaired either by nonhomologous end joining (NHEJ) or by homologous recombination (HR), using a marked template, to introduce targeted alterations in the DNA. Since the binding specificity of zinc fingers can be easily engineered, ZFNs can, in principle, be constructed to target any gene in a genome. We have shown that when ZFNs are expressed in nematode somatic tissues, they frequently produce mutagenic DSBs at both synthetic and genomic targets. When a ZFN target sequence was placed on an extrachromosomal array, 26% of all targets examined contained a ZFN-induced mutation - most frequently a 4-bp insertion indicative of joining of blunted DNA ends. When a unique 18-bp sequence (Nw) on the nematode X chromosome was targeted, 18% of the targets analyzed contained a mutation. Here most mutations consisted of small deletions, which can also arise by the rejoining of blunted DNA ends after resection. To investigate this repair mechanism, identical experiments were performed in lig-4- nematodes, which lack the ligase IV protein central to the NHEJ pathway. In this case, mutation frequency at both targets dropped markedly, and most mutations consisted of substitutions, consistent with an alternate synthesis-dependent DNA repair mechanism. These results indicate that DSBs are preferentially blunted and repaired by ligase IV and that, in its absence, alternate repair processes must be employed. Differences in the 4-bp insertion frequency at the synthetic and genomic targets may be due to increased HR on a repetitive array, which amplifies such insertions when they are used as templates for subsequent repair events. Experiments to examine the interplay between NHEJ-mediated repair and the HR processes required for gene targeting will be forthcoming. These results indicate that if ZFNs can be activated in the germline, targeted mutant offspring can be produced at a high frequency. Since transgene expression is often suppressed in the germline, we have developed an RFP-GFP reporter to monitor transgene activity. Expression of the yeast recombinase Flp excises an RFP coding sequence in the reporter construct and allows a myo-2 promoter to instead drive GFP. As conditions favoring germline activity are discovered, ZFNs can be placed in identical contexts in wild-type and cosuppression-deficient (hpl-2-) nematodes.