Mice have been successfully cloned from both somatic cells and hybrid embryonic stem (ES) cells. Heterozygosity of the donor ES cell genome has been suggested as a crucial factor for long-term survival of cloned mice. In the present study, an inbred ES cell line, HM-1 (129/Ola), and a well-tested ES cell line, R1 (129/Sv × 129/Sv-CP), were used as donor cells to evaluate the developmental potential of nuclear transfer embryos. We found that ES cell confluence dramatically affects the developmental potential of reconstructed embryos. With the ES cell line HM-1 and 80–90% confluence, 49% of reconstructed embryos developed to the morula/blastocyst stage, 9% of these embryos developed to live pups when transferred to the surrogate mothers, and 5 of 18 live pups survived to adulthood. By contrast, at 60–70% confluence, only 22% of embryos developed to the morula/blastocyst stage, and after transfer, only a single fetus reached term. Consistent with previous reports, the nuclei of R1 ES cells were also shown to direct development to term, but no live pups were derived from cells at later passages (>20). Our results show that the developmental potential of reconstructed embryos is determined by both cell confluence and cell passage. These results also demonstrate that the inbred ES cell line, HM-1, can be used to produce viable cloned mice, although less efficiently than most heterozygous ES cell lines.