The bacterial xanthine-guanine phosphoribosyl transferase (gpt) gene was inserted by homologous recombination into the chromosomal alpha 1-antitrypsin (alpha 1AT) gene of HPRT-deficient human hepatoma cells. These insertions encoded chimeric alpha 1AT-gpt mRNAs that were expressed in the modified cells. Six targeted integrations were obtained, but only two of these harbored simple insertion events. The remaining four homologous insertions contained additional DNA sequences 3' of the gpt coding cassette. Variant cell lines deficient for gpt expression were isolated from transfectants containing either homologous or non-homologous gpt insertions by selection in media containing 6-thioguanine. These variant cell lines expressed alpha 1AT but not alpha 1AT-gpt mRNAs, indicating that they contained expression defects in cis. Genotypic analyses suggested that the predominant mechanism by which the variants were generated was by nondisjunctive loss of chromosomes containing the modified alpha 1AT-gpt alleles. Somatic cell hybrids formed by fusing hepatoma cells containing targeted alpha 1AT-gpt insertions with fibroblasts exhibited extinction of both modified and unmodified alpha 1AT alleles.