The relationship between DNA structure of replacement vectors and gene targeting efficiency was studied using positive-negative selection. The vectors contained pBR322 DNA, a bacterial neomycin-resistance gene (neo) for positive selection, a herpes simplex virus (HSV) thymidine kinase gene (tk) for negative selection, and a mouse genomic fragment, including exons 1 to 3 of the transthyretin (ttr) gene. The neo gene that confers G418 resistance was inserted into the second ttr exon, and the HSV-tk gene that confers gancyclovir (GANC) sensitivity was added to the 3' end of the ttr fragment. The vectors were linearized by digesting with restriction enzyme(s) and transfected into mouse embryonal carcinoma F9 cells. In this system, the enrichment by GANC selection as well as the frequency of gene targeting was increased by placing the pBR322 DNA at the 3' end of the HSV-tk gene. Adding one more HSV-tk gene at the 5' end of the ttr fragment did not increase the enrichment by GANC selection. This enrichment factor was also increased by reducing the size of the ttr fragment present between the two selection markers. However, it decreased the frequency of gene targeting and, overall, it did not increase the efficiency of isolating targeted clones. When structures of the vector DNA fragments present in 20 G418-resistant and GANC-resistant non-targeted clones were examined by Southern blot analysis, the inefficiency of GANC selection proved to be mostly caused by exonucleolytic degradation of HSV-tk genes progressing from ends of the vectors.