Islet-1 is a LIM-Homeodomain transcription factor with important functions for the development of distinct neuronal and non-neuronal cell populations. We show here that Islet-1 acts genetically downstream of Phox2B in cells of the sympathoadrenal cell lineage and that the development of sympathetic neurons and chromaffin cells is impaired in mouse embryos with a conditional deletion of Islet-1 controlled by the wnt1 promotor. Islet-1 is not essential for the initial differentiation of sympathoadrenal cells, as indicated by the correct expression of pan-neuronal and catecholaminergic subtype specific genes in primary sympathetic ganglia of Islet-1 deficient mouse embryos. However, our data indicate that the subsequent survival of sympathetic neuron precursors and their differentiation towards TrkA expressing neurons depends on Islet-1 function. In contrast to spinal sensory neurons, sympathetic neurons of Islet-1 deficient mice did not display ectopic expression of genes normally present in the CNS. In Islet-1 deficient mouse embryos the numbers of chromaffin cells were only mildly reduced, in contrast to that of sympathetic neurons, but the initiation of the adrenaline synthesizing enzyme PNMT was abrogated and the expression level of chromogranin A was diminished. Microarray analysis revealed that developing chromaffin cells of Islet-1 deficient mice displayed normal expression levels of TH, DBH and the transcription factors Phox2B, Mash-1, Hand2, Gata3 and Insm1, but the expression levels of the transcription factors Gata2 and Hand1, and AP-2ß were significantly reduced. Together our data indicate that Islet-1 is not essentially required for the initial differentiation of sympathoadrenal cells, but has an important function for the correct subsequent development of sympathetic neurons and chromaffin cells.