ABSTRACT Wnts are secreted signaling molecules implicated in various developmental processes and frizzled proteins are the receptors for these Wnt ligands. To investigate the physiological roles of frizzled proteins, we isolated and characterized a novel mouse frizzled gene Fzd5. Fzd5 mRNA was expressed in the yolk sac, eye and lung bud at 9.5 days post coitum. Fzd5 specifically synergized with Wnt2, Wnt5a and Wnt10b in ectopic axis induction assays in Xenopus embryos. Using homologous recombination in embryonic stem cells, we have generated Fzd5 knockout mice. While the heterozygotes were viable, fertile and appeared normal, the homozygous embryos died in utero around 10.75 days post coitum, owing to defects in yolk sac angiogenesis. At 10.25 days post coitum, prior to any morphological changes, endothelial cell proliferation was markedly reduced in homozygous mutant yolk sacs, as measured by BrdU labeling. By 10.75 days post coitum, large vitelline vessels were poorly developed, and the capillary plexus was disorganized. At this stage, vasculogenesis in the placenta was also defective, although that in the embryo proper was normal. Because Wnt5a and Wnt10b co-localized with Fzd5 in the developing yolk sac, these two Wnts are likely physiological ligands for the Fzd5-dependent signaling for endothelial growth in the yolk sac.