Retroviral vectors have been used to treat patients with the X-linked severe combined immunodeficiency disease and chronic granulomatous disease. In both cases, success has been undermined by clonal expansion of transduced cells in some patients due to insertional mutagenesis induced by random vector integration. This outcome underscores the importance of designing vectors for site-specific gene insertion to avoid unanticipated gene disruption or gene activation. In the present study, we incorporated the sequence-specific Cre protein into lentiviral virions. We demonstrated that the virion-associated Cre protein remained enzymatically active and was capable of directing site-specific insertion of a gene in the vector into a defined loxP site in the host genome. As there are loxP-like sequences throughout human genome that can be recognized by either wild-type Cre or Cre variants, our study demonstrates a new strategy of designing lentiviral-based vector for gene targeting.