A cre-IRES-DsRed cassette with a nuclear localization signal at the 5' end of the cre sequence (and an intronic sequence placed inside the cre gene to increase expression) was knocked into the Aqp5 locus by homologous recombination in W2 ES cells. The cre cassette was inserted into exon 1, with the endogenous start codon of Aqp5 being replaced by the ATG start codon of cre recombinase. Recombined ES cells were injected into blastocysts to produce chimeric animals, The Frt-flanked PGK-neo selection that had been inserted with the cre-IRES-DsRed cassette was subsequently excised by crossing chimeric males to Gt(ROSA)26Sortm1(FLP1)Dym animals. Cre activity was analyzed by crossing Aqp5-cre mice to R26lacZ or R26mT/mG reporter animals. Expression was detected in alveolar type I (AT1) cells in adult lungs.