BACKGROUND: The low-density lipoprotein (LDL) receptor gene family is a highly conserved group of membrane receptors with diverse functions in developmental processes, lipoprotein trafficking, and cell signaling. The low-density lipoprotein (LDL) receptor-related protein 1b (LRP1B) was reported to be deleted in several types of human malignancies, including non-small cell lung cancer. Our group has previously reported that a distal extracellular truncation of murine Lrp1b that is predicted to secrete the entire intact extracellular domain (ECD) is fully viable with no apparent phenotype. METHODS AND PRINCIPAL FINDINGS: Here, we have used a gene targeting approach to create two mouse lines carrying internally rearranged exons of Lrp1b that are predicted to truncate the protein closer to the N-terminus and to prevent normal trafficking through the secretary pathway. Both mutations result in early embryonic lethality, but, as expected from the restricted expression pattern of LRP1b in vivo, loss of Lrp1b does not cause cellular lethality as homozygous Lrp1b-deficient blastocysts can be propagated normally in culture. This is similar to findings for another LDL receptor family member, Lrp4. We provide in vitro evidence that Lrp4 undergoes regulated intramembraneous processing through metalloproteases and gamma-secretase cleavage. We further demonstrate negative regulation of the Wnt signaling pathway by the soluble extracellular domain. CONCLUSIONS AND SIGNIFICANCE: Our results underline a crucial role for Lrp1b in development. The expression in mice of truncated alleles of Lrp1b and Lrp4 with deletions of the transmembrane and intracellular domains leads to release of the extracellular domain into the extracellular space, which is sufficient to confer viability. In contrast, null mutations are embryonically (Lrp1b) or perinatally (Lrp4) lethal. These findings suggest that the extracellular domains of both proteins may function as a scavenger for signaling ligands or signal modulators in the extracellular space, thereby preserving signaling thresholds that are critical for embryonic development, as well as for the clear, but poorly understood role of LRP1b in cancer.