This paper considers (potentially) harmful consequences of transgenesis for farm animal welfare and examines the strategy of studying health and welfare of transgenic farm animals. Evidence is discussed showing that treatments imposed in the context of farm animal transgenesis are by no means biologically neutral and may compromise animal health and welfare. Factors posing a risk for the welfare of transgenic farm animals include integration of a transgene within an endogenous gene with possible loss of host gene function (insertional mutations), inappropriate transgene expression and exposure of the host to biologically active transgene-derived proteins, and in vitro reproductive technologies employed in the process of generating transgenic farm animals that may result in an increased incidence of difficult parturition and fetal and neonatal losses and the development of unusually large or otherwise abnormal offspring (large offspring syndrome). Critical components of a scheme for evaluating welfare of transgenic farm animals are identified, related to specific characteristics of transgenic animals and to factors that may interact with the effects of transgenesis. The feasibility of an evaluation of welfare of transgenic farm animals in practice is addressed against the background of the objectives and conditions of three successive stages in a long-term transgenic program. Concrete steps with regard to breeding and testing of transgenic farm animals are presented, considering three technologies to generate transgenic founders: microinjection, electroporation and nuclear transfer, and gene targeting including gene knockout. The proposed steps allow for unbiased estimations of the essential treatment effects, including hemi- and homozygous transgene effects as well as effects of in vitro reproductive technologies. It is suggested that the implementation of appropriate breeding and testing procedures should be accompanied by the use of a comprehensive welfare protocol, specifying which parameters to monitor, at which stages of the life of a farm animal, and in how many animals. Some prerequisites and ideas for such a protocol are given. It is anticipated that systematic research into the welfare of farm animals involved in transgenesis will facilitate the use of the safest experimental protocols as well as the selection and propagation of the healthiest animals and, thereby, enable technological progress that could be ethically justified.