Because only few of its client proteins are known, the physiological roles of the endoplasmic reticulum chaperone glucose-regulated protein 94 (GRP94) are poorly understood. Using targeted disruption of the murine GRP94 gene, we show that it has essential functions in embryonic development. grp94−/− embryos die on day 7 of gestation, fail to develop mesoderm, primitive streak, or proamniotic cavity. grp94−/− ES cells grow in culture and are capable of differentiation into cells representing all three germ layers. However, these cells do not differentiate into cardiac, smooth, or skeletal muscle. Differentiation cultures of mutant ES cells are deficient in secretion of insulin-like growth factor II and their defect can be complemented with exogenous insulin-like growth factors I or II. The data identify insulin-like growth factor II as one developmentally important protein whose production depends on the activity of GRP94. Keywords: chaperone/HSP90/Insulin-like growth factors/mouse development.