The subject invention pertains to materials and methods for preparing multi-potential stem cells having a pre-selected expression of MHC antigens. Stem cells of the subject invention can be used to generate histocompatible tissues/organs for transplantation. The process of the subject invention comprises the use of targeting vectors capable of gene knockout, insertion of site-specific recombination cassettes, and the replacement of histocompatibility alleles in the stem cell. Novel knockout vectors are used to delete designated regions of one chromosome. Recombination cassette vectors are then used to delete the same region on the second chromosome and deposit a site-specific recombination cassette which can be utilized by replacement vectors for inserting the new MHC genes on the chromosome of the engineered cell. The subject invention also pertains to cells, tissues, and transgenic mammal prepared using the methods and materials of the invention.