Abstract RNA interference is a powerful tool for studying gene function, however, the reproducible generation of RNAi tools including RNAi transgenic mice remains a significant limitation. One main hurdle is the identification of potent RNAi triggers, or short hairpin RNAs (shRNAs), that will induce stable and regulated gene silencing. Due to the lack of understanding of the requirements for shRNA biogenesis and target suppression, many predicted shRNAs fail to efficiently induce gene suppression. We have developed a “Sensor assay” that enables the biological identification of effective shRNAs at large scale and show that our assay reliably identifies potent shRNAs that are surprisingly rare and predominantly missed by existing algorithms. In addition, we have engineered a new miRNA scaffold, miR-E, that is more efficiently processed and thus produces more potent knockdown of target genes than our previous miR30 system. By combining our sensored miR-E based shRNAs with high efficiency ES cell targeting, we have developed a fast, scalable pipeline for the production of shRNA transgenic mice with reversible gene silencing. We show that RNAi can cause sufficient knockdown to recapitulate the phenotypes of knockout mice, particularly in cancer models. More importantly, unlike traditional knockout models, RNAi has the powerful advantage of reversibility, since the endogenous gene remains intact. Using this system, we generated a number of inducible RNAi transgenic lines and demonstrate how this approach can identify predicted phenotypes and also unknown functions for well-studied genes. In addition, through regulated gene silencing we are able to mimic drug therapy in mice without the actual drug molecule, allowing us to determine the therapeutic value and/or toxic effects associated with systemic gene suppression. Using this approach, we have been able to pinpoint potential toxicities associated with gene inhibition, results that will guide drug development to avoid target failures which will likely cause harmful and intolerable effects in patients. In a model of hepatocellular carcinoma, we demonstrate that short-term inhibition of a ribosomal protein is sufficient to induce stable cell cycle arrest of liver tumor cells. This system provides a cost-effective and scalable platform for the production of RNAi transgenic mice targeting any mammalian gene - mice with enormous predictive power that will shape our development of better tolerated therapies. Citation Format: Prem K. Premsrirut, BoYoung Yoon, Marina Pesic, Lukas E. Dow, Johannes Zuber, Scott W. Lowe, Gregory J. Hannon, Lars Zender, Christof Fellmann. RNAi mouse models: Revolutionizing drug discovery in vivo. [abstract]. In: Proceedings of the 105th Annual Meeting of the American Association for Cancer Research; 2014 Apr 5-9; San Diego, CA. Philadelphia (PA): AACR; Cancer Res 2014;74(19 Suppl):Abstract nr 2974. doi:10.1158/1538-7445.AM2014-2974