The mixed-lineage leukaemia gene (MLL/HRX/ALL-1) is disrupted by chromosomal translocation in human acute leukaemias that often display mixed lymphoid-myeloid phenotypes and present in infancy. MLL possesses a highly conserved SET domain also found in Drosophila trithorax (trx) and Polycomb group (Pc-G) genes, which are known to regulate homeotic genes (HOM-C) in a positive or negative fashion, respectively. Mll was targeted in mice by homologous recombination in embryonic stem (ES) cells to assess its role in pattern development. Mll heterozygous (+/-) mice had retarded growth, displayed haematopoietic abnormalities, and demonstrated bidirectional homeotic transformations of the axial skeleton as well as sternal malformations. Mll deficiency (-/-) was embryonic lethal. Anterior boundaries of Hoxa-7 and Hoxc-9 expression were shifted posteriorly in Mll +/- embryos, but their expression was abolished in Mll -/- embryos. Thus Mll is required for proper segment identity in mammals, displays haplo-insufficiency, and positively regulates Hox gene expression.