Known examples of male to female sex reversal in mice are caused by either strain incompatibilities or mutations in genes required for male sex determination. The resultant XY females are often sterile or exhibit very poor fertility. We describe here embryonic stem (ES) cell growth conditions that promote the production of healthy, anatomically normal fertile and fecund female F0 generation mice completely derived from gene-targeted XY male ES cells. The sex reversal is a transient trait that is not transmitted to the F1 progeny. Growth media with low osmolality and reduced sodium bicarbonate, maintained throughout the gene targeting process, enhance the yield of XY females. As a practical application of the induced sex reversal, we demonstrate the generation of homozygous mutant mice ready for phenotypic studies by the breeding of F0 XY females with their isogenic XY male clonal siblings, thereby eliminating one generation of breeding and the associated costs.