We show that every countable direct system of finite-dimensional real or complex Lie groups has a direct limit in the category of Lie groups modelled on locally convex spaces. This enables us to push all basic constructions of finite-dimensional Lie theory to the case of direct limit groups. In particular, we obtain an analogue of Lie's third theorem: every countable-dimensional locally finite real or complex Lie algebra arises as the Lie algebra of some regular Lie group (a suitable direct limit group).