p300 and CBP are large nuclear acetyltransferases exhibiting a complex multi-domain structure. Mouse embryos nullizygous for either p300 or Cbp die at midgestation, while heterozygotes are viable but in part display defects in neurulation or bone morphogenesis. To directly examine the contribution of the acetyltransferase (AT) activity to mouse development, we have abrogated this function by a knock-in approach. Remarkably, a single AT-deficient allele of p300 or Cbp leads to embryonic or neonatal lethality, indicating that the mutant alleles are dominant. Formation of the cardiovascular system, the lung and the small intestine are strongly impaired in p300 AT and to a much lesser extent in Cbp AT mutant embryos, a difference that is also reflected by the defects in gene expression. Embryonic stem cells homozygous for either the p300 AT or a p300 null mutation respond differently to BMP2 stimulation, indicating that the two alleles are not equivalent. Unexpectedly, the p300 AT-mutant cells upregulate BMP-inducible genes to levels similar or even higher than observed in wild-type cells.