THE outer layer of the blastocyst, or trophectoderm, is the first cell lineage to differentiate in the mouse embryo^1,2, but little is known about the genetic control of its development. Lineage-specific transcription factors may be important in lineage specification, and the product of the Mash-2 gene^3,4 fulfils the criteria for such a factor. Mash-2 is a mammalian member of the achaete-scute family^5–7 which encodes basic-helix–loop–helix transcription factors⁸ and is strongly expressed in the extraembryonic tropho-blast lineage. Mash-2 transcripts are found in the female germ line and in the embryo throughout preimplantation development, but are highly expressed later only in the ectoplacental cone, the chor-ion and their derivatives in the placenta. Mash-2 transcripts are not found in primary and secondary giant cells, yolk sac or allantois at any post-implantation stage, and are present only transiently and at low levels in the embryo during gastrulation. To analyse the role of Mash-2 in development, we have used gene targeting to generate mice having no Mash-2 function. We report here that Mash-2^-/- embryos die from placental failure at 10 days post-coitum. In mutant placentas, spongiotrophoblast cells and their precursors are absent and chorionic ectoderm is reduced. We have rescued this placental mutant phenotype by constructing chimaeras with tetraploid wild-type embryos which contribute almost exclusively to extraembryonic tissues^9,10. Mash-2^-/- embryos developed normally and adult Mash-2^-/- mice were viable, demonstrating that Mash-2 has no major role in the embryo itself. ^Mash-2 is the first transcription factor shown to play a critical part in the development of the mammalian trophoblast lineage.