Yolk sac and placenta are required to sustain embryonic development in mammals, yet our understanding of the genes and processes that control morphogenesis of these extraembryonic tissues is still limited. The chato mutation disrupts ZFP568, a Krüppel-Associated-Box (KRAB) domain Zinc finger protein, and causes a unique set of extraembryonic malformations, including ruffling of the yolk sac membrane, defective extraembryonic mesoderm morphogenesis and vasculogenesis, failure to close the ectoplacental cavity and incomplete placental development. Phenotypic analysis of chato embryos indicated that ZFP568 does not control proliferation or differentiation of extraembryonic lineages, but rather regulates the morphogenetic events that shape extraembryonic tissues. Analysis of chimeric embryos showed that Zfp568 function is required in embryonic-derived lineages, including the extraembryonic mesoderm. Depleting Zfp568 affects the ability of extraembryonic mesoderm cells to migrate. However, explanted Zfp568 mutant cells could migrate properly when plated on appropriate extracellular matrix conditions. We show that expression of Fibronectin and Indian Hedgehog are reduced in chato mutant yolk sacs. This data suggests that ZFP568 controls the production of secreted factors required to promote morphogenesis of extraembryonic tissues. Our results support previously undescribed roles of the extraembryonic mesoderm in yolk sac morphogenesis and in the closure of the ectoplacental cavity and identify a novel role of ZFP568 in the development of extraembryonic tissues.