Background Rat pre-implantation embryos often suffer 2-cell stage developmental arrest and fail to progress further under in-vitro conditions. Objective In order to understand underlying mechanism leading to 2-cell arrest, we investigated the molecular changes, culture conditions and subcellular changes. Methods Gene expression in in-vivo developed 2-cell embryos (in-vivo), in-vitro developed 2-cell embryos (in-vitro), and in-vitro 2-cell arrested embryos (arrested) were investigated using microarrays and real-time PCR. Ultra-structural changes were determined using electron microscopy. Results Gene expression was similar between in-vivo and invitro embryos. Over 2400 genes changed in arrested embryos compared to in-vivo and in-vitro embryos. The mRNAs encoding proteins involved in translation were elevated in arrested embryos. In-vivo and in-vitro embryos highly expressed genes that were involved in cell cycle, and protein catabolic process compared to arrested embryos. Gene expression data suggested subcellular changes associated with 2-cell block. Transmission electron microscopy showed that in-vivo embryos had healthy subcellular structure, whereas arrested embryos did not have a nuclear membrane, contained small mitochondria and autophagic vacuoles. Furthermore, gene expression data was used for the optimization of culture media conditions to obtain better in-vitro embryonic development.Comparison of five and 20 % oxygen in culture resulted in two times more blastocyst formation with 5 % oxygen. Conclusions These results showed that although all experimental groups appeared morphologically similar, arrested embryos had ultra-structural and molecular changes associated with oxidative stress and apoptosis. In-vitro culture under low oxygen and media additives reduced 2-cell block in rat embryos.