BACKGROUND: RNA interference (RNAi) technology is a powerful methodology recently developed for the specific knockdown of targeted genes. RNAi is most commonly achieved either transiently by transfection of small interfering (si) RNA oligonucleotides, or stably using short hairpin (sh) RNA expressed from a DNA vector or virus. Much controversy has surrounded the development of rules for the design of effective siRNA oligonucleotides; and whether these rules apply to shRNA is not well characterized. RESULTS: To determine whether published algorithms for siRNA oligonucleotide design apply to shRNA, we constructed 27 shRNAs from 11 human genes expressed stably using retroviral vectors. We demonstrate an efficient method for preparing wild-type and mutant control shRNA vectors simultaneously using oligonucleotide hybrids. We show that sequencing through shRNA vectors can be problematic due to the intrinsic secondary structure of the hairpin, and we determine a strategy for effective sequencing by using a combination of modified BigDye chemistries and DNA relaxing agents. The efficacy of knockdown for the 27 shRNA vectors was evaluated against six published algorithms for siRNA oligonucleotide design. Our results show that none of the scoring algorithms can explain a significant percentage of variance in shRNA knockdown efficacy as assessed by linear regression analysis or ROC curve analysis. Application of a modification based on the stability of the 6 central bases of each shRNA provides fair-to-good predictions of knockdown efficacy for three of the algorithms. Analysis of an independent set of data from 38 shRNAs pooled from previous publications confirms these findings. CONCLUSION: The use of mixed oligonucleotide pairs provides a time and cost efficient method of producing wild type and mutant control shRNA vectors. The addition to sequencing reactions of a combination of mixed dITP/dGTP chemistries and DNA relaxing agents enables read through the intrinsic secondary structure of problematic shRNA vectors. Six published algorithms for siRNA oligonucleotide design that were tested in this study show little or no efficacy at predicting shRNA knockdown outcome. However, application of a modification based on the central shRNA stability should provide a useful improvement to the design of effective shRNA vectors.