A developmental niche vacancy in host embryos is necessary for stem cell complementation-based organ regeneration (SCOG). Thyroid transcription factor 1 (TTF-1) is a tissue-specific transcription factor that regulates the embryonic development and differentiation of the thyroid and, more importantly, lungs; thus, it has been considered as a master gene to knockout in order to develop a lung vacancy host. TTF-1 knockout mice were originally produced by inserting a stop codon in Exon 3 of the gene (E3stop) through embryonic stem cell-based homologous recombination. The main problems of utilizing E3stop host embryos for lung SCOG are that these animals all have a tracheoesophageal fistula (TEF), which cannot be corrected by donor stem cells, and most of them have monolateral sac-like lungs. To improve the mouse model towards achieving SCOG-based lung generation, in this project, we used the CRISPR/Cas9 tool to remove Exon 2 of the gene by zygote microinjection and successfully produced TTF-1 knockout (E2del) mice. Similar to E3stop, E2del mice are birth-lethal due to retarded lung development with sac-like lungs and only a rudimentary bronchial tree, increased basal cells but without alveolar type II cells and blood vessels, and abnormal thyroid development. Unlike E3stop, 57% of the E2del embryos presented type I tracheal agenesis (TA, a kind of human congenital malformation) with a shortened trachea and clear separations of the trachea and esophagus, while the remaining 43% had TEF. Furthermore, all the E2del mice had bilateral sac-like lungs. Both TA and bilateral sac-like lungs are preferred in SCOG. Our work presents a new strategy for producing SCOG host embryos that may be useful for lung regeneration.