Forkhead box O1 (FoxO1), a member of the Forkhead box-containing O family of transcription factors, is a key regulator of numerous genes that govern a wide array of cellular functions, including differentiation, homeostasis, and survival. However, the role of FoxO1 in development remains elusive. Here, we describe an essential and previously undefined role for FoxO1 in placental development. We demonstrate that FoxO1 -null embryos up to embryonic day 9.0 (E9.0) are indistinguishable, including their morphology, cardiovascular structure, and vascular gene expression, from wild-type (WT) littermates. However, FoxO1 -nulls manifested a profoundly swollen/hydropic allantois, which failed to fuse with the chorion, a phenotype that leads to subsequent cardiovascular malformation, progressive apoptotic cell death, and embryonic lethality at E10.5. Quantitative RT-PCR analysis of genes involved in placental development revealed significant attenuation of VCAM1 expression in FoxO1 -null embryos. Using immunohistochemical, transcriptional, and chromatin immunoprecipitation assays, we further discovered that FoxO1 is an essential upstream regulator of the VCAM1 gene. Collectively, our findings provide critical molecular insight into a unique FoxO1 – VCAM1 axis that governs placental morphogenesis, a process that is essential for subsequent normal cardiovascular development and fetal life.