Identifying the genes or epigenetic factors that control the self-renewal and differentiation of stem cells is critical to understanding the molecular basis of cell commitment. Although a number of insertional mutagenesis vectors have been developed for identifying gene functions in animal models, the L1 retrotransposition system offers additional advantages as a tool to disrupt genes in embryonic stem cells in order to identify their functions and the phenotypes associated with them. Recent advances in producing synthetic versions of L1 retrotransposon vector system and the optimization of techniques to accurately identify retrotransposon integration sites have increased their utility for gene discovery applications. We have developed a novel episomal, nonviral L1 retrotransposon vector using scaffold/matrix attachment regions that provides stable, sustained levels of retrotransposition in cell cultures without being affected by epigenetic silencing or from some of the common problems of vector integration. This modified vector contains a GFP marker whose expression occurs only after successful gene disruption events and thus the cells with disrupted genes can be easily picked for functional analysis. Here we present a method to disrupt gene function in embryonic stem cells that aid in the identification of genes involved in stem cell differentiation processes. The methods presented here can be easily adapted to the study of other types of cancer stem cells or induced pluripotent stem cells using the L1 retrotransposon as an insertional mutagen.