Gene targeting is the use of homologous recombination to make defined alterations to the genome. One of the possible outcomes of gene targeting is the accurate correction of genetic defects, and this would make it the ideal method of gene therapy for single gene disorders. While gene targeting has been achieved both in human cell lines and in nontransformed, primary human cells, its low efficiency has been a major limitation to its therapeutic potential. Gene therapy by in vivo gene targeting is therefore impractical without dramatic improvements in targeting efficiency. Ex vivo approaches might more realistically be considered, but would benefit from progress in the isolation and growth of somatic stem cells and improvements in targeting efficiency. We provide here a brief review of the challenges of gene therapy by gene targeting. This is followed by a critical overview of recent developments in gene targeting techniques, and in our understanding of the underlying processes of homologous and nonhomologous recombination.