Members of the Ets family of transcription factors mediate transcriptional responses of multiple signaling pathways in diverse cell types and organisms. Targeted deletion of the conserved DNA binding domain of the Ets2 transcription factor results in the retardation and death of homozygous mouse embryos before 8.5 days of embryonic development. Defects in extraembryonic tissue gene expression and function include deficient expression of matrix metalloproteinase-9 (MMP-9, gelatinase B), persistent extracellular matrix, and failure of ectoplacental cone proliferation. Mutant embryos were rescued by aggregation with tetraploid mouse embryos, which complement the developmental defects by providing functional extraembryonic tissues. Rescued Ets2-deficient mice are viable and fertile but have wavy hair, curly whiskers, and abnormal hair follicle shape and arrangement, resembling mice with mutations of the EGF receptor or its ligands. However, these mice are not deficient in the production of TGFα or the EGF receptor. Homozygous mutant cell lines respond mitogenically to TGFα, EGF, FGF1, and FGF2. However, FGF fails to induce MMP-13 (collagenase-3) and MMP-3 (stromelysin-1) in the Ets2-deficient fibroblasts. Ectopic expression of Ets2 in the deficient fibroblasts restores expression of both matrix metalloproteinases. Therefore, Ets2 is essential for placental function, mediating growth factor signaling to key target genes including MMP-3, MMP-9, and MMP-13 in different cell types, and for regulating hair development.