Noonan syndrome is a common human autosomal dominant birth defect, characterized by short stature, facial abnormalities, heart defects and possibly increased risk of leukemia. Mutations of Ptpn11 (also known as Shp2), which encodes the protein-tyrosine phosphatase Shp2, occur in ∼50% of individuals with Noonan syndrome, but their molecular, cellular and developmental effects, and the relationship between Noonan syndrome and leukemia, are unclear. We generated mice expressing the Noonan syndrome–associated mutant D61G. When homozygous, the D61G mutant is embryonic lethal, whereas heterozygotes have decreased viability. Surviving Ptpn11^D61G/+ embryos (∼50%) have short stature, craniofacial abnormalities similar to those in Noonan syndrome, and myeloproliferative disease. Severely affected Ptpn11^D61G/+ embryos (∼50%) have multiple cardiac defects similar to those in mice lacking the Ras-GAP protein neurofibromin. Their endocardial cushions have increased Erk activation, but Erk hyperactivation is cell and pathway specific. Our results clarify the relationship between Noonan syndrome and leukemia and show that a single Ptpn11 gain-of-function mutation evokes all major features of Noonan syndrome by acting on multiple developmental lineages in a gene dosage–dependent and pathway-selective manner.