In many experimental models and clinical examples, defects in the differentiation of the second heart field (SHF) and heart outflow tract septation defects are combined, although the mechanistic basis for this relationship has been unclear. We found that as the initial SHF population incorporates into the outflow tract, it is replenished from the surrounding progenitor territory. In retinoic acid (RA) receptor mutant mice, this latter process fails, and the outflow tract is shortened and misaligned as a result. As an additional consequence, the outflow tract is misspecified along its proximal-distal axis, which results in ectopic expression of TGFbeta2 and ectopic mesenchymal transformation of the endocardium. Reduction of TGFbeta2 gene dosage in the RA receptor-deficient background restores septation but does not rescue alignment defects, indicating that excess TGFbeta causes septation defects. This may be a common pathogenic pathway when second heart field and septation defects are coupled.