The Escherichia coli lacZ gene has been used as an indicator gene for the study of cell lineage in vivo. To adapt this marker for gene expression studies, a sequence encoding a modified beta-galactosidase and including the simian virus 40 large tumor nuclear location signal (nls-beta-Gal) has been introduced into vectors. In differentiated cells, multipotential cells, and embryos, the constructs led to the expression of an enzymatically active protein. Its location was examined by its beta-galactosidase activity or by using antibodies and electron microscopy. The results show that the nls-beta-Gal protein remains mainly located at the nuclear periphery (probably at the nuclear pores) but does not reach the nucleoplasm. It suggests that an interaction with the nuclear membrane is necessary but not sufficient for protein uptake into the nucleus. In multipotential cells, the expression of nuclear location signal LacZ (nls-LacZ) interferes neither with cell growth nor with differentiation. Using various lacZ constructs, the transcriptional activity of embryos was studied. At the two-cell stage, the promoters of the Rous sarcoma virus, simian virus 40, and the beta-actin gene are functional but the Moloney murine leukemia virus long terminal repeat is not. Thus, transcriptional specificity must already be present at the stage of activation of the embryonic genome.