Dlx3 is a homeodomain transcription factor and a member of the vertebrate Distal-less family. Targeted deletion of the mouse Dlx3 gene results in embryonic death between day 9.5 and day 10 because of placental defects that alter the development of the labyrinthine layer. In situ hybridization reveals that the Dlx3 gene is initially expressed in ectoplacental cone cells and chorionic plate, and later in the labyrinthine trophoblast of the chorioallantoic placenta, where major defects are observed in the Dlx3 -/- embryos. The expression of structural genes, such as 4311 and PL-1, which were used as markers to follow the fate of different derivatives of the placenta, was not affected in the Dlx3-null embryos. However, by day 10.5 of development, expression of the paired-like homeodomain gene Esx1 was strongly down-regulated in affected placenta tissue, suggesting that Dlx3 is required for the maintenance of Esx1 expression, normal placental morphogenesis, and embryonic survival.