Vertebrate Bmp2 and Bmp4 diverged from a common ancestral gene and encode closely related proteins. Mice homozygous for null mutations in either gene show early embryonic lethality, thereby precluding analysis of shared functions. In the current studies, we present phenotypic analysis of compound mutant mice heterozygous for a null allele of Bmp2 in combination with null or hypomorphic alleles of Bmp4. Whereas mice lacking a single copy of Bmp2 or Bmp4 are viable and have subtle developmental defects, compound mutants show embryonic and postnatal lethality due to defects in multiple organ systems including the allantois, placental vasculature, ventral body wall, skeleton, eye and heart. Within the heart, BMP2 and BMP4 function coordinately to direct normal lengthening of the outflow tract, proper positioning of the outflow vessels, and septation of the atria, ventricle and atrioventricular canal. Our results identify numerous BMP4-dependent developmental processes that are also very sensitive to BMP2 dosage, thus revealing novel functions of Bmp2.