The beta-globin locus control region (LCR) is a complex regulatory element that is essential for the appropriate red cell-specific expression of all cis-linked beta-globin genes. Of the five hypersensitive sites that define the LCR, only 5'HS2 has been shown to augment gene expression in vitro in both transient and stable assays, as well as in transgenic mice. Thus, 5'HS2 has been assumed to be an important element for the function of the LCR in vivo. We have utilized homologous recombination in murine embryonic stem (ES) cells and phenotypic analysis in derived mice to investigate the function of 5'HS2 in its normal chromosomal position in the murine beta-globin locus. Replacement of 5'HS2 with a selectable marker gene (delta HS2 + neo) causes a 2-5-fold reduction in expression of all of the genes in the locus, and a more pronounced effect (10-12-fold) on the most 5' embryonic globin gene, Ey, when expression of this gene is first detectable during embryogenesis. The mutation produces no alterations in the developmental timing of expression of the globin genes. When homozygous, the deletion/replacement mutation is lethal in utero, with the embryos dying during the stage of yolk sac and early fetal liver erythropoiesis. To distinguish phenotypic effects resulting from the deletion of 5'HS2 from those attributable to insertion of the selectable marker, the selectable marker was removed by expressing the FLP site-specific recombinase in ES cells harboring the homologous recombination event. Mice derived from these ES cells (delta HS2 delta neo) demonstrated nearly full expression of all the beta-like globin genes on the mutated chromosome. These results indicate that although 5'HS2 demonstrates significant regulatory activities in a variety of assays, deletion of this element from the endogenous beta-globin locus has no significant effect on the timing or extent of expression of the locus. In addition, this result emphasizes that when using homologous recombination to analyze complex regulatory elements in vivo, the inserted selectable marker must be removed to avoid influencing the phenotype of the mutation.