
The Chronic dev team has just released
GreenPois0n RC5 jailbreaking tool which can be used to jailbreak iDevices running the latest iOS 4.2.1 firmware. Only catch here is that (for now) GreenPois0n RC5 is
available only for Mac and it is not a stable release (RC5 - Release candidate 5). GreenPois0n for Windows and Linux is expected to arrive soon.
With GreenPois0n RC5, you will be able to jailbreak iOS 4.2.1 (untethered) on iPhone 4, iPhone 3GS, iPod Touch 4G/3G/2G, iPad and Apple TV 2G. Unlike
Redsnow 0.9.7, Greenpois0n RC5 will not need any 4.2b3 SHSH Blobs saved on Cydia for Untethered Jailbreak.
Download GreenPois0n RC5

You can download GreenPois0n RC5 from
Greenpois0n RC5 or use this
mirror. You can check the guide given below to use GreenPois0n RC5 to jailbreak iOS 4.2.1, but be aware of this being an unstable release and expect some problems if you don't follow the procedure carefully.
Update: Greenpois0n RC5_2 has been released which fixes some of the previous issues. Download it
here or
here.
Update: GreenPois0n RC5 released for Windows. Download at greenpois0n.com or
here.
How to Jailbreak...