RNAi is a powerful tool for interrogating gene function in ES cells. Combining the high penetrance of a microRNA-embedded shRNA (shRNA-mir) cassette with a locus-defined, inducible expression strategy, we developed a system for RNAi in mouse ES cells. An shRNA-mir cassette is targeted near the constitutively active HPRT locus under a tetracycline (tet)-regulatable promoter through Cre-mediated site-specific recombination. The major advantage of this system is that the shRNA-mir cassette can be targeted to a precise locus, allowing for control of shRNA-mir expression in an inducible fashion. Induction of an shRNA-mir directed against the pluripotency factor, Nanog, resulted in the loss of self-renewal and differentiation to parietal endoderm-like cells, which can be rescued by the introduction of an RNAi-immune version of Nanog cDNA. Knockdown efficiency can be enhanced by using multiple shRNA-mir hairpins against the target gene, which was further validated by knocking down two additional ES cell factors. This site-directed, virus-free, and tet-inducible RNAi system, designated as SDVFi RNAi in our study, presents an efficient option for controlled gene silencing in ES cells.