Ovine primary fetal fibroblasts were cotransfected with a neomycin resistance marker gene (neo) and a human coagulation factor IX genomic construct designed for expression of the encoded protein in sheep milk. Two cloned transfectants and a population of neomycin (G418)–resistant cells were used as donors for nuclear transfer to enucleated oocytes. Six transgenic lambs were liveborn: Three produced from cloned cells contained factor IX and neo transgenes, whereas three produced from the uncloned population contained the marker gene only. Somatic cells can therefore be subjected to genetic manipulation in vitro and produce viable animals by nuclear transfer. Production of transgenic sheep by nuclear transfer requires fewer than half the animals needed for pronuclear microinjection.