GRP78, also known as BiP, is a central regulator of endoplasmic reticulum (ER) homeostasis due to its multiple functional roles in protein folding, ER calcium binding, and controlling of the activation of transmembrane ER stress sensors. ER stress induction of GRP78/BiP represents a major prosurvival arm of the unfolded protein response (UPR). However, the physiological role of GRP78 in development is not known. Using a transgenic approach, we discovered that the Grp78 promoter is activated in both the trophectoderm and inner cell mass (ICM) of embryos at embryonic day 3.5 via a mechanism requiring the ER stress elements. To reveal the function of the GRP78 in vivo, we created a tri-loxP Grp78 mutant allele, which was further crossed with EIIA-cre to create a knockout allele. The Grp78 ؉/؊ mice, which express 50% of the wild-type level of the GRP78 protein, are viable. Interestingly, the heterozygous Grp78 cells up-regulate the ER proteins GRP94 and protein disulfide isomerase at both the transcript and protein levels, while other UPR targets such as CHOP and XBP-1 are not affected. Further studies revealed that mouse embryonic fibroblasts from Grp78 ؉/؊ mice are capable of responding to ER stress. However, Grp78؊/؊ embryos that are completely devoid of GRP78 lead to peri-implantation lethality. These embryos do not hatch from the zona pellucida in vitro, fail to grow in culture, and exhibit proliferation defects and a massive increase in apoptosis in the ICM, which is the precursor of embryonic stem cells. These findings provide the first evidence that GRP78 is essential for embryonic cell growth and pluripotent cell survival.The unfolded protein response (UPR), which is conserved from yeast to human, triggers multiple pathways to allow cells to respond to stress conditions that target the endoplasmic reticulum (ER) (17). The ER is the site for the synthesis of secretory and membrane proteins and lipids and is also a major intracellular calcium storage compartment. As such, ER homeostasis is critical for the survival of eukaryotic cells. The 78-kDa glucose-regulated protein GRP78, also referred to as the immunoglobulin binding protein BiP, is a stress-inducible ER chaperone that belongs to the HSP70 family (15,27). GRP78 is composed of three domains: the ATPase domain, the peptide-binding domain, and a C-terminal domain with unknown function (21). GRP78 binds to the unfolded peptides through the peptide-binding domain and uses the energy from hydrolyzing ATP to promote proper folding and to prevent aggregation (22). GRP78 also possesses the capacity to bind Ca 2ϩ , which helps to immobilize Ca 2ϩ and maintain ER calcium homeostasis (26). Furthermore, GRP78 serves as a master modulator for the UPR network by binding to the ER stress sensors PERK, Ire1p, and ATF6 and inhibiting their activation (3, 43). Furthermore, due to its antiapoptotic property, stress induction of GRP78 represents an important prosurvival arm of the UPR, with implications for cancer progression, drug resistance, neuroprotection, and diabete...