Heterozygous Tbx5^del/+ mice were generated to study the mechanisms by which TBX5 haploinsufficiency causes cardiac and forelimb abnormalities seen in Holt-Oram syndrome. Tbx5 deficiency in homozygous mice (Tbx5^del/del) decreased expression of multiple genes and caused severe hypoplasia of posterior domains in the developing heart. Surprisingly, Tbx5 haploinsufficiency also markedly decreased atrial natriuretic factor (ANF) and connexin 40 (cx40) transcription, implicating these as Tbx5 target genes and providing a mechanism by which 50% reduction of T-box transcription factors cause disease. Direct and cooperative transactivation of the ANF and cx40 promoters by Tbx5 and the homeodomain transcription factor Nkx2-5 was also demonstrated. These studies provide one potential explanation for Holt-Oram syndrome conduction system defects, suggest mechanisms for intrafamilial phenotypic variability, and account for related cardiac malformations caused by other transcription factor mutations.