<PAGE>   1
                                                                   EXHIBIT 10.18


                              [Sangamo letterhead]


                                 March 17, 2000


Alan Wolffe, Ph.D.
10209 Summit Avenue
Kensington, MD 20895

Dear Alan:

               This will constitute the employment agreement between you and
Sangamo BioSciences, Inc. (the "Company") following your acceptance of our offer
dated March 9, 2000.

               1. You will serve as Senior Vice President and Chief Scientific
Officer and will report directly to me as President and Chief Executive Officer.
You will commence employment in such position on March 20, 2000, or as soon
thereafter in March 2000 as possible, and your employment shall continue until
terminated by you or the Company.

               2. Your base salary will be at the annual rate of $250,000 and
will be paid in accordance with the Company's payroll practices, subject to all
applicable withholdings.

               3. You will be eligible for an annual bonus of up to 33 percent
of your base salary. The amount of the bonus will be determined by the Board of
Directors based on our bonus plan as amended from time to time.

               4. The Board of Directors has granted you a stock option for
200,000 shares of the Company's common stock under our 1995 Stock Option Plan.
The effective date of the option will be the date of your actual commencement of
employment with the Company. For purposes of your option grant, you will be
deemed to have commenced employment with the Company once you have terminated
employment with your current employer, accepted this agreement and become
subject to the direction of the Company as to your job assignments and placed on
the Company's payroll. The option will have an exercise price per share equal to
the fair market value per share of the Company's common stock on the grant date
as determined by the Board of Directors, which was $8.00 per share. The option
will be an incentive stock option under the federal tax laws, to the maximum
extent allowable, which is 12,500 shares, and the balance will be a
non-statutory option. The option will have a maximum term of ten (10) years,
subject to earlier termination upon your cessation of employment. The option
will become exercisable 25 percent of the option shares upon your completion of
one year of employment with the Company and will become exercisable for the
balance of the option shares in a series of 36 successive equal monthly
installments, upon your completion of each of the next 36 months of employment
with the Company following the first anniversary of your start date. The


<PAGE>   2
Alan Wolffe, Ph.D.                                                March 17, 2000
                                                                          Page 2

remaining terms of your option will be governed by the provisions of the
Company's 1995 Stock Incentive Plan. No additional vesting will occur after your
termination of employment.

               The Board of Directors also approved a loan of up to $400,000 to
you to enable you to exercise up to 50,000 shares covered by your option. If you
wish to undertake the loan, you will be required to execute a promissory note
and pledge agreement. The form of promissory note is attached and the pledge
agreement will be in customary form. Under these documents you will pledge the
shares of stock you purchase to secure the loan, and will repay the loan within
three years or upon the sale of the pledged stock, whichever is sooner. The loan
will bear interest at seven percent per year payable annually. Of course, it is
entirely up to you whether you wish to avail yourself of this loan.

               You will be entitled to the special protection provided by the
attached addendum to your standard form of option agreement. This addendum in
general provides for automatic acceleration of your options if your employment
is involuntarily terminated (except for misconduct) within twelve (12) months
after change in control of the Company.

               5. You will be eligible to participate in all group life
insurance plans, group health and dental plans, and long-term disability
programs, a Section 125 flex plan, a 401(k) retirement plan and other executive
perquisites which are made available to the Company's executives and for which
you qualify. You will accrue paid vacation benefits at the rate of 15 days per
year and will have available 10 sick days per year.

               6. Upon your purchase of a house to move your family to the San
Francisco Bay Area, the Company will loan you $250,000, with principal payable
in 4 years from the date of the loan with interest at 7% per annum payable on
each anniversary date of the loan. Twenty-five percent (25%) of principal and
accrued interest on the loan will be forgiven on each anniversary date of the
loan so long as you are a full time employee of the Company at such time. As an
alternative, the Company will invest up to $250,000 in a home for which you will
pay the balance and will occupy. The Company's equity interest in the home will
decline by 25 percent at the end of each year following the date of investment
so long as you are a full time employee of the Company at the end of such year.
The other terms of the Company's investment in the home will be specified in an
agreement between you and the Company to be signed at such time as you elect
this alternative.

               7. The Company will reimburse you for your relocation expenses
from Maryland to the San Francisco Bay Area, including trips to the Bay Area for
you and your wife to locate a home.

               8. The Company will employ your wife as a scientist at an annual
salary of $70,000 per year, for up to _____ months until she finds another
position.


<PAGE>   3
Alan Wolffe, Ph.D.                                                March 17, 2000
                                                                          Page 3


               9. At the time you commence employment with the Company, you will
be required to execute the Company's standard Proprietary Information and
Inventions Agreement, a copy of which will be furnished to you prior to your
start date.

               10. Consistent with the other Vice Presidents of the Company,
your employment with the Company is not for any specified period of time. As a
result, either you or the Company are free to terminate your employment
relationship at any time for any reason, with or without cause. In addition,
your employment relationship will immediately terminate upon your death or
disability. At the time your employment terminates, the Company will only be
required to pay you (i) any unpaid base salary for services rendered through the
date of such termination and (ii) the dollar value of all accrued and unused
vacation benefits based upon the level of base salary in effect for you at the
time of your termination. Of course, if applicable the life or disability
insurance proceeds would be available.

               11. Verification of your citizenship or right to work in the
United States is required, and you will need to provide proof of this on your
first day of employment.

               12. This agreement shall be governed in all respects by
California law applicable to agreements executed in California.

               13. Arbitration. Any and all disputes between you and the Company
which arise under the terms of this letter agreement shall be resolved through
final and binding arbitration, including (without limitation) any disputes
relating to this letter agreement, your employment by the Company or the
termination of that employment, any claims for breach of contract or breach of
the covenant of good faith and fair dealing, and any claims of discrimination or
other claims under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, the
California Fair Employment and Housing Act or any other federal, state or local
law or regulation now in existence or hereinafter enacted and as amended from
time to time concerning in any way the subject of your employment with the
Company or the termination of that employment. The only claims not covered by
this Paragraph 13 are claims for benefits under the workers' compensation or
unemployment insurance laws, which are to be resolved pursuant to those laws.
Binding arbitration shall be conducted in San Francisco City and County,
California, in accordance with the rules and regulations of the American
Arbitration Association. Each party shall split the cost of the arbitration
filing and hearing fees, and the cost of the arbitrator; each party shall bear
his or its own attorney fees, that is, the arbitrator shall not have authority
to award attorney fees unless a statutory section at issue in the dispute
authorizes the award of attorney fees to the prevailing party, in which case the
arbitrator shall have authority to make such award as permitted by the statute
in question. The arbitration shall be instead of any civil litigation, and you
hereby waive your right to a jury trial as to such claims. The arbitrator's
decision shall be final and binding to the fullest extent permitted by law and
enforceable by any court having jurisdiction thereof.


<PAGE>   4
Alan Wolffe, Ph.D.                                                March 17, 2000
                                                                          Page 4


               We are delighted that you will have agreed to join Sangamo. We
believe that you bring the skills and expertise to help us continue to build our
Company into a leadership position. We look forward to working with you in
developing the full potential of our Company.

               To indicate your acceptance of the foregoing terms of your
employment, please sign the duplicate original of this letter and return it to
me.



                                            Very truly yours,

                                            -------------------------------
                                            Edward O. Lanphier, II
                                            President and CEO


<PAGE>   5
Alan Wolffe, Ph.D.                                                March 17, 2000
                                                                          Page 5

                                   ACCEPTANCE

               I hereby accept and agree to the terms of the foregoing
employment agreement with Sangamo BioSciences, Inc.



                                  -----------------------------------------
                                             ALLAN WOLFFE



                                  DATED: MARCH ___, 2000