Stem cells from a patient with a genetic disease could be used for cell therapy if it were possible to insert a functional copy of the defective gene. In this study, we investigate the transfection and subsequent integration of large genomic fragments into human cord blood-derived multipotent stem cells. We describe for the first time the creation of clonal stem cells carrying a human bacterial artificial chromosome (BAC) containing the Friedreich ataxia locus with an enhanced green fluorescent protein (EGFP) reporter gene fused to exon 5a of the frataxin (FXN) gene. Integration of the BAC into the host cell genome was confirmed by PCR, Southern blot and fluorescent in situ hybridization analysis. Reverse transcription-PCR and flow cytometry confirmed expression of FXN-EGFP. Correct mitochondrial localization of the protein was confirmed using fluorescent microscopy. The transfected stem cells also retained the ability to differentiate into cells from all three germline layers, as demonstrated by the capacity to form neuron-specific β-tubulin-expressing cells, Alizarin Red S-positive bone-like cells, and epithelial-like cells expressing surfactant protein C. This is the first study to demonstrate that cord blood-derived multipotent stem cells may be useful targets for gene therapy applications using large genomic loci.