Cell polarity plays a critical role in the development of all metazoans; however, the mechanisms of cell polarity and the specific role of cell polarity pathways in mammalian organisms are still poorly understood. Lethal giant larvae (Lgl) is an apical-basal polarity gene identified in Drosophila, where it functions as a tumor suppressor controlling self-renewal and differentiation of progenitor cells. There are two orthologs of Lgl in mammalian genomes: Llgl1 and Llgl2. While mammalian Lgls are assumed to be tumor suppressor genes, little is known about their function in vivo. Here we report the functional analysis of murine Llgl2. We generated Llgl2(-/-) mice and found that Llgl2 functions as a polarity protein required for proper branching morphogenesis during placental development. Llgl2(-/-) pups are born as runts but quickly catch up in size and grow into normal-size adults. Surprisingly, no prominent phenotypes or spontaneous tumors were observed in adult Llgl2(-/-) mice. Analyses of placental trophoblasts reveal a critical role for Llgl2 in cell polarization and polarized cell invasion. We conclude that mammalian Llgl2 is required for proper polarized invasion of trophoblasts and efficient branching morphogenesis during placental development, but, unlike its Drosophila ortholog, it does not function as a canonical tumor suppressor gene.