We describe a versatile genetic system for rapid analysis of mammalian gene function. In this, loss of reporter activity in a novel embryonic stem (ES) cell line enables rapid identification of targeting to the ubiquitously expressed Rosa26 locus. Subsequent regulation of gene activity is governed by a dual regulatory strategy utilizing two drugs, Tamoxifen and Doxycycline. To illustrate this approach, a dominant allele of Smoothened was introduced into this cell line, enabling regulated activation of Hedgehog signaling. By coupling Cre-loxP dependent activation with tetracycline dependent transcription in a single allele, we established a conditional method to control Smoothened activity and neural progenitor specification in differentiating ES cells in vitro and in chimeric embryos in vivo When crossed to an appropriate Cre driver strain, gene activity can also be temporally regulated within a specific cell lineage. This platform will facilitate rapid analysis of gene function in the mouse.