Bloom syndrome is a disorder associated with genomic instability that causes affected people to be prone to cancer. Bloom cell lines show increased sister chromatid exchange, yet are proficient in the repair of various DNA lesions. The underlying cause of this disease are mutations in a gene encoding a RECQ DNA helicase. Using embryonic stem cell technology, we have generated viable Bloom mice that are prone to a wide variety of cancers. Cell lines from these mice show elevations in the rates of mitotic recombination. We demonstrate that the increased rate of loss of heterozygosity (LOH) resulting from mitotic recombination in vivo constitutes the underlying mechanism causing tumour susceptibility in these mice.