It's Capecchi, Evans and Smithies by a Knockout. (October 10, 2007)

Mario Capecchi, whose NIH grant application in the 1980s was knocked back with the comment that he ought to forget about it, Martin Evans, and Oliver Smithies have been awarded the 2007 Nobel Prize in Medicine or Physiology for their development of knockout mice. Such mice are designed to lack a specific gene or genes, thereby helping researchers to determine the functions of the specific gene or gene group.

Capecchi at the University of Utah and Smithies at the University of Wisconsin (he is now at the University of North Carolina) each developed  methods to introduce mutant DNA into specific chromosomal positions.

Martin Evans' contribution was to introduce the use of mouse embryonic stem cells in such a way so as to increase the efficacy of the the method, allowing it to become a universal technique for genetic analyses.

As ScienceNOW point out: "To date, researchers have knocked out at least 11,000 genes in mice, observing what goes wrong in development or adulthood and thereby gaining a sense of what the gene does (Science, 30 June 2006, p. 1862)."

See Also: http://nobelprize.org/nobel_prizes/medicine/laureates/2007/press.pdf