Extraembryonic ectoderm differentiation and chorioallantoic attachment are fibroblast growth factor (FGF)- and transforming growth factor β-regulated processes that are the first steps in the development of the placenta labyrinth and the establishment of the fetal-maternal circulation in the developing embryo. Only a small number of genes have been demonstrated to be important in trophoblast stem cell differentiation. Erf is a ubiquitously expressed Erk-regulated, ets domain transcriptional repressor expressed throughout embryonic development and adulthood. However, in the developing placenta, after 7.5 days postcoitum (dpc) its expression is restricted to the extraembryonic ectoderm, and its expression is restricted after 9.5 dpc in a subpopulation of labyrinth cells. Homozygous deletion of Erf in mice leads to a block of chorionic cell differentiation before chorioallantoic attachment, resulting in a persisting chorion layer, a persisting ectoplacental cone cavity, failure of chorioallantoic attachment, and absence of labyrinth. These defects result in embryo death by 10.5 dpc. Trophoblast stem cell lines derived from Erf^dl1/dl1 knockout blastocysts exhibit delayed differentiation and decreased expression of spongiotrophoblast markers, consistent with the persisting chorion layer, the expanded giant cell layer, and the diminished spongiotrophoblast layer observed in vivo. Our data suggest that attenuation of FGF/Erk signaling and consecutive Erf nuclear localization and function is required for extraembryonic ectoderm differentiation, ectoplacental cone cavity closure, and chorioallantoic attachment.