vHNF1/HNF1beta, a member of the divergent HNF1/vHNF1 homeoprotein family, is expressed in polarized epithelia of several adult organs and may participate in controlling the transcription of specific genes. In addition to this late requirement, vHNF1 may play earlier roles during development, as it is first expressed in the visceral endoderm at the onset of gastrulation. In order to shed light on its function during embryogenesis, we have inactivated the murine gene by homologous recombination. The homozygous mutation results in embryonic lethality by day 7.5 of development and vHNF1(-)(/)(-) embryos display a disorganized visceral endoderm and a significantly reduced size. Studies of ES cell differentiation and aggregation with tetraploid morulae establish that vHNF1 expression is essential for visceral endoderm differentiation, both in vitro and in vivo. Analysis of differentiation markers confirms that vHNF1 is part of a genetic network that directs the expression of HNF4 and downstream endodermal genes. Furthermore, the complementation of the mutant embryos with wild-type visceral endoderm rescues the day 7.5 lethality and reveals an additional phenotype linked to vHNF1 later expression. The examination of chimeric embryos suggests that vHNF1 expression might be cell-autonomously required in the gut for the proper morphogenesis of the embryo.