The murine blastocyst contains two nonoverlapping pools of progenitor cells: the embryonic component contributes to the fetus and generates embryonic stem cells in vitro, whereas the extraembryonic pool contributes to the placenta and generates trophoblast stem cells in vitro. The transcriptional repressor Foxd3 is required for maintenance of the epiblast and the in vitro establishment of embryonic stem cell lines. Here, we demonstrate that Foxd3 is also required in the trophoblast lineage. Trophoblast progenitors in Foxd3-/- embryos do not self-renew and are not multipotent, but instead give rise to an excess of trophoblast giant cells. Injection of Foxd3-/- blastocysts with wild type ES cells fails to rescue Foxd3-/- placentas and such chimeras die around 10 days of embryogenesis. These results indicate an essential role for Foxd3 in two nonoverlapping progenitor cell populations that require different secreted factors to maintain their multipotent properties in vitro and give rise to divergent tissues in vivo. Moreover, this provides support for the hypothesis that there are conserved molecular mechanisms for maintaining the self-renewing properties of diverse progenitor cell types.