Transcription factor gene AP-2␥ belongs to a family of four closely related genes. AP-2␥ had been implicated in multiple functions during proliferation and differentiation based on its expression pattern in trophoblast, neural crest, and ectoderm cells in murine embryos. In order to address the question of the role of AP-2␥ during mammalian development, we generated mice harboring a disrupted AP-2␥ allele. AP-2␥ heterozygous mice are viable and display reduced body sizes at birth but are fertile. Mice deficient for AP-2␥, however, are growth retarded and die at days 7 to 9 of embryonic development. Immunohistochemical analysis revealed that the trophectodermal cells that are found to express AP-2␥ fail to proliferate, leading to failure of labyrinth layer formation. As a consequence, the developing embryo suffers from malnutrition and dies. Analysis of embryo cultures suggests that AP-2␥ is also implicated in the regulation of the adenosine deaminase (ADA) gene, a gene involved in purine metabolism found expressed at the maternal-fetal interface. Therefore, AP-2␥ seems to be required in early embryonic development because it regulates the genetic programs controlling proliferation and differentiation of extraembryonic trophectodermal cells.The AP-2 transcription factor gene family consists of four different genes referred to as AP-2␣, AP-2, AP-2␥, and the recently discovered AP-2␦ gene (4,15,17,19,22,37,40). All members of the AP-2 family share a characteristic protein structure containing a unique C-terminal helix-span-helix motif that mediates protein dimerization; together with a basic domain they are involved in DNA binding with varying affinity to GC-rich elements. An N-terminal proline-and glutaminerich region mediates transcriptional activation (33,36).Despite the expression of all AP-2 genes in the extraembryonic trophoblast cells, it remained unclear if there was a redundant function in placental gene regulation. Gene knockout experiments with AP-2␣ and AP-2 indicate that the AP-2 proteins carry out individual functions during mouse development. While AP-2␣ is predominantly essential for craniofacial development and ventral body wall closure (29, 39), lack of AP-2 leads to polycystic kidney disease (20). Both AP-2␣-and AP-2-deficient mice display unaltered implantation and placentation. Is AP-2␥ a key regulator of placental development? Prior to implantation, AP-2␥ is expressed in the trophoblast cells starting at day 3.5 of murine development. After implantation, the expression of AP-2␥ continues in the trophoblast cells and its derivatives, the primary giant cells and the diploid cells of the polar trophectoderm. With ongoing proliferation of the trophoblast cells, AP-2␥ is expressed in the ectoplacental cone and the extraembryonic ectoderm. At the time of chorioallantoic fusion, AP-2␥ expression is increased in all derivatives of the trophoblast lineage (27, 30). Thus, AP-2␥, together with the T-box gene Eomes (26), is the only transcription factor gene found to be expressed in all trophoblast li...