Notch signalling plays an important role in endocrine development, through its target gene Hes1. Hes1, a bHLH transcriptional repressor, influences progenitor cell proliferation and differentiation. Recently, Hes1 was shown to be expressed in the thyroid and regulate expression of the sodium iodide symporter (Nis). To investigate the role of Hes1 for thyroid development, we studied thyroid morphology and function in mice lacking Hes1. During normal mouse thyroid development, Hes1 was detected from E9.5 onwards in the median anlage, and at E11.5 in the ultimobranchial bodies. Hes1(-/-) mouse embryos had a significantly lower number of Nkx2-1-positive progenitor cells (p<0.05) at E9.5 and at E11.5. Moreover, Hes1(-/-) mouse embryos showed a significantly smaller total thyroid surface area (-40 to -60%) compared to wild type mice at all study time points (E9.5-E16.5). In both Hes1(-/-) and wild type mouse embryos, most Nkx2-1-positive thyroid cells expressed the cell cycle inhibitor p57 at E9.5 in correlation with low proliferation index. In Hes1(-/-) mouse embryos, fusion of the median anlage with the ultimobranchial bodies was delayed by 3 days (E16.5 vs. E13.5 in wild type mice). After fusion of thyroid anlages, hypoplastic Hes1(-/-) thyroids revealed a significantly decreased labelling area for T4 (-78%) and calcitonin (-65%) normalized to Nkx2-1 positive cells. Decreased T4-synthesis might be due to reduced Nis labelling area (-69%). These findings suggest a dual role of Hes1 during thyroid development: first, control of the number of both thyrocyte and C-cell progenitors, via a p57-independent mechanism; second, adequate differentiation and endocrine function of thyrocytes and C-cells.