The cell adhesion molecule E-cadherin mediates the compaction process of mouse preimplantation embryos and is important for the maintenance and function of epithelial cell layers. To determine precisely the role of E-cadherin in epithelial biogenesis we monitored the developmental potential of embryos homozygously negative for E-cadherin that were derived from E-cadherin heterozygous transgenic mice. The homozygous negative embryos died around the time of implantation, although they did undergo compaction like their littermate controls, largely due to the presence of residual maternal E-cadherin. At the blastocyst stage, E-cadherin-negative embryos failed to form a trophectodermal epithelium or a blastocyst cavity. These results demonstrate the pivotal role of E-cadherin in one of the most basic morphogenetic events in the development of multicellular organisms, the biogenesis of an epithelium.