The use of small interfering RNA molecules for therapeutic applications requires development of improved delivery systems, a process that would be facilitated by a non-invasive positive-readout mouse model for studying siRNA pharmacodynamics. Positive readout would yield better signal/noise ratios than existing negative-readout systems. We have engineered a positive-readout luciferase reporter system, activated by successful delivery of siRNA targeting the lac repressor. Co-transfection of a plasmid expressing lac repressor and a plasmid expressing firefly luciferase under the control of an RSV promoter, containing two lac operator sites, resulted in 5.7-fold lower luciferase activity than luciferase-encoding plasmid alone. Inhibition was reversed following addition of synthetic inducer, IPTG, which elevated luciferase expression to normal levels and confirmed functionality of the lac operon. Delivery of 1nM siRNA targeting lac repressor to repressor/reporter co-transfected cells was sufficient to fully restore luciferase expression to levels observed in the absence of repressor. Maximum expression was observed after 48hr, with a rapid decrease thereafter due to the short half life of luciferase. The luciferase positive-readout reporter system is therefore a dynamic indicator of successful RNAi delivery in vitro and could be adapted to generate a transgenic mouse capable of reporting RNAi activity non-invasively in vivo.