Dystroglycan is a central component of the dystrophin-glycoprotein complex (DGC), a protein assembly that plays a critical role in a variety of muscular dystrophies. In order to better understand the function of dystroglycan in development and disease, we have generated a null allele of dystroglycan (Dag1^neo2) in mice. Heterozygous Dag1^neo2 mice are viable and fertile. In contrast, homozygous Dag1^neo2 embryos exhibit gross developmental abnormalities beginning around 6.5 days of gestation. Analysis of the mutant phenotype indicates that an early defect in the development of homozygous Dag1^neo2 embryos is a disruption of Reichert's membrane, an extra-embryonic basement membrane. Consistent with the functional defects observed in Reichert's membrane, dystroglycan protein is localized in apposition to this structure in normal egg cylinder stage embryos. We also show that the localization of two critical structural elements of Reichert's membrane—laminin and collagen IV—are specifically disrupted in the homozygous Dag1^neo2 embryos. Taken together, the data indicate that dystroglycan is required for the development of Reichert's membrane. Furthermore, these results suggest that disruption of basement membrane organization might be a common feature of muscular dystrophies linked to the DGC.