A number of studies have suggested that the active derivative of vitamin A, retinoic acid (RA), may be important for early development of mammalian embryos. Severe vitamin A deprivation in rodents results in maternal infertility, precluding a thorough investigation of the role of RA during embryogenesis. Here we show that production of RA by the retinaldehyde dehydrogenase-2 (Raldh2) enzyme is required for mouse embryo survival and early morphogenesis. Raldh2 is an NAD-dependent aldehyde dehydrogenase with high substrate specificity for retinaldehyde. Its pattern of expression during mouse development has suggested that it may be responsible for embryonic RA synthesis. We generated a targeted disruption of the mouse Raldh2 gene and found that Raldh2-/- embryos, which die at midgestation without undergoing axial rotation (body turning), exhibit shortening along the anterioposterior axis and do not form limb buds. Their heart consists of a single, medial, dilated cavity. Their frontonasal region is truncated and their otocysts are severely reduced. These defects result from a block in embryonic RA synthesis, as shown by the lack of activity of RA-responsive transgenes, the altered expression of an RA-target homeobox gene and the near full rescue of the mutant phenotype by maternal RA administration. Our data establish that RA synthesized by the post-implantation mammalian embryo is an essential developmental hormone whose lack leads to early embryo death.