We describe a novel cloning method termed SLiCE (Seamless Ligation Cloning Extract) that utilizes easy to generate bacterial cell extracts to assemble multiple DNA fragments into recombinant DNA molecules in a single in vitro recombination reaction. SLiCE overcomes the sequence limitations of traditional cloning methods, facilitates seamless cloning by recombining short end homologies (≥15 bp) with or without flanking heterologous sequences and provides an effective strategy for directional subcloning of DNA fragments from Bacteria Artificial Chromosomes (BACs) or other sources. SLiCE is highly cost effective as a number of standard laboratory bacterial strains can serve as sources for SLiCE extract. In addition, the cloning efficiencies and capabilities of these strains can be greatly improved by simple genetic modifications. As an example, we modified the DH10B Escherichia coli strain to express an optimized λ prophage Red recombination system. This strain, termed PPY, facilitates SLiCE with very high efficiencies and demonstrates the versatility of the method.