We have used retroviral vector technology to develop a method for functional screening of combinatorial peptide libraries expressed inside mammalian cells with the ultimate goal of identifying new drug targets. The method was validated in a library screening experiment based on antigen presentation of small peptides. A library encoding SIXNXEKX-peptides, where X designates randomised positions corresponding to major histocompatibility (MHC) class I anchor residues, was generated in a retroviral vector. The library was transduced into a population of antigen presenting cells (APCs) known to mediate MHC class I restricted presentation of the SIINFEKL peptide. The cellular library was screened by using an antigen presentation assay in which a T cell hybridoma recognising the MHC class I/SIINFEKL peptide complex was employed. Using this experimental model, we identified two positive cellular clones both encoding SIINFEKL peptides with identical codon usage. This number corresponded well to the expected frequency of SIINFEKL in the library. The lack of identification of other peptides capable of activating the T-hybridoma supports previous findings of a high degree of specificity at the level of peptide-loading of MHC-molecules. The result further demonstrates the potential of using combinatorial libraries for functional screening and selection of effector peptides stably expressed in mammalian cells.