Growth factors are thought to function as pivotal autocrine-paracrine regulatory signals during embryonic development. Insulin-like growth factor II (IGF-II), a mitogenic polypeptide for a variety of cell lines, could have such a role, as indicated by the pattern of expression of its gene during rodent development. The IGF-II gene uses at least three promoters and expresses several transcripts in many tissues during the embryonic and neonatal periods, whereas expression in adult animals is confined to the choroid plexus and the leptomeninges. To examine the developmental role of IGF-II, we have begun to study the consequences of introducing mutations at the IGF-II gene locus in the mouse germ line. We have disrupted one of the IGF-II alleles in cultured mouse embryonic stem (ES) cells by gene targeting and constructed chimaeric animals. Germ-line transmission of the inactivated IGF-II gene from male chimaeras yielded heterozygous progeny that were smaller than their ES cell-derived wild-type littermates (about 60% of normal body weight). These growth-deficient animals were otherwise apparently normal and fertile. The effect of the mutation was exerted during the embryonic period. These results provide the first direct evidence for a physiological role of IGF-II in embryonic growth.