Hrs is an early endosomal protein homologous to Vps27p, a yeast protein required for vesicular trafficking. Hrs has a FYVE double zinc finger domain, which specifically binds phosphatidylinositol(3)-phosphate and is conserved in several proteins involved in vesicular traffic. To understand the physiological role of Hrs, we generated mice carrying a null mutation of the gene. Hrs homozygous mutant embryos developed with their ventral region outside of the yolk sac, had two independent bilateral heart tubes (cardia bifida), lacked a foregut, and died around embryonic day 11 (E11). These phenotypes arise from a defect in ventral folding morphogenesis that occurs normally around E8.0. Significant apoptosis was detected in the ventral region of mutant embryos within the definitive endoderm, suggesting an important role of this germ layer in ventral folding morphogenesis. Abnormally enlarged early endosomes were detected in the mutants in several tissues including definitive endoderm, suggesting that a deficiency in vesicular transport via early endosomes underlies the mutant phenotype. The vesicular localization of Hrs was disrupted in cells treated with wortmannin, implicating Hrs in the phosphatidylinositol 3-kinase pathway of membrane trafficking.