A broad spectrum of biological activities has been proposed for transforming growth factor-beta 3 (TGF-beta 3). To study TGF-beta 3 function in development, TGF-beta 3 null mutant mice were generated by gene-targeting. Within 20 hours of birth, homozygous TGF-beta 3-/- mice die with unique and consistent phenotypic features including delayed pulmonary development and defective palatogenesis. Unlike other null mutants with cleft palate, TGF-beta 3-/- mice lack other concomitant craniofacial abnormalities. This study demonstrates an essential function for TGF-beta 3 in the normal morphogenesis of palate and lung, and directly implicates this cytokine in mechanisms of epithelial-mesenchymal interaction.