We have developed a novel induction gene trap approach that preselects in vitro for integrations into genes that lie downstream of receptor/ligand-mediated signaling pathways. Using this approach, we have identified 20 gene trap integrations in embryonic stem cells, 9 of which were induced and 11 of which were repressed after exposure to exogenous retinoic acid (RA). All but one of these integrations showed unique spatially restricted or tissue-specific patterns of expression between 8.5 and 11.5 days of embryogenesis. Interestingly, expression was observed in tissues that are affected by alterations in RA levels during embryogenesis. Sequence analysis of fusion transcripts from six integrations revealed five novel gene sequences and the previously identified protooncogene c-fyn. To date, germ-line transmission and breeding has uncovered one homozygous embryonic lethal and three homozygous viable insertions. These studies demonstrate the potential of this induction gene trap approach for identifying and mutating genes downstream of signal transduction pathways.