With the growing use of genome‐wide screens for cis‐regulatory elements, there is a pressing need for platforms that enable fast and cost‐effective experimental validation of identified hits in relevant developmental and tissue contexts. Here, we describe a murine embryonic stem cell (ESC)‐based system that facilitates rapid analysis of putative transcriptional enhancers. Candidate enhancers are targeted with high efficiency to a defined genomic locus via recombinase‐mediated cassette exchange. Targeted ESCs are subsequently differentiated in vitro into desired cell types, where enhancer activity is monitored by reporter gene expression. As a proof of principle, we analyzed a previously characterized, Sonic hedgehog (Shh)‐dependent, V3 interneuron progenitor (pV3)‐specific enhancer for the Nkx2.2 gene, and observed highly specific enhancer activity. Given the broad potential of ESCs to generate a spectrum of cell types, this system can serve as an effective platform for the characterization of gene regulatory networks controlling cell fate specification and cell function. genesis 50: 443–450, 2012. © 2011 Wiley Periodicals, Inc.