Genetically engineered fibroblasts have been successfully used to produce therapeutic proteins in animals, but sustained production of the proteins has not been achieved. This limits the potential of fibroblast-mediated gene therapy in humans. We have studied the phenomenon of decreased production in rats by using retroviral vectors carrying genes encoding human adenosine deaminase and neomycin phosphotransferase. While transplanted skin fibroblasts containing vector sequences persisted at constant levels for at least 8.5 mo, vector expression decreased by greater than 1500-fold after 1 mo. Cellular or antibody-mediated immune responses were not detected in transplanted animals, and expression could not be restored in fibroblasts recultivated from the grafts. This phenomenon is reminiscent of sequence-specific gene inactivation observed in other cell types. Because genetic manipulation and expression of foreign proteins did not affect survival of the transplanted cells, effective long-term therapy may be possible with the use of alternative gene regulatory elements.