The placenta and cardiovascular system are the first organ systems to form during mammalian embryogenesis. We show here that a single gene is critical for development of both. The Hand1 gene, previously called Hxt, eHAND and Thingl, encodes a basic helix-loop-helix (bHLH) transcription factor that starts to be expressed during pre-implantation development. After implantation, Handl expression is restricted to placental trophoblast cells and later to embryonic cardiac and neural crest cells^1–3. We generated Hand1-null mutant mice by gene targetting. Homozygous mutant embryos arrested by embryonic day (E) 7.5 of gestation with defects in trophoblast giant cell differentiation. This early mortality could be rescued by aggregation of mutant embryos with wild-type tetraploid embryos, which contribute wild-type cells to the trophoblast, but not the embryo. By E10.5, however, the Hand1-null fetuses derived from tetraploid chimaeras died due to cardiac failure. Their heart tubes showed abnormal looping and ventricular myocardial differentiation. Therefore, Handl is essential for differentiation of both trophoblast and cardiomyocytes, which are embryologically distinct cell lineages.