Ceramide transfer protein (CERT) functions in the transfer of ceramide from the endoplasmic reticulum (ER) to the Golgi. In this study, we show that CERT is an essential gene for mouse development and embryonic survival and, quite strikingly, is critical for mitochondrial integrity. CERT mutant embryos accumulate ceramide in the ER but also mislocalize ceramide to the mitochondria, compromising their function. Cells in mutant embryos show abnormal dilation of the ER and degenerating mitochondria. These subcellular changes manifest as heart defects and cause severely compromised cardiac function and embryonic death around embryonic day 11.5. In spite of ceramide accumulation, CERT mutant mice do not die as a result of enhanced apoptosis. Instead, cell proliferation is impaired, and expression levels of cell cycle-associated proteins are altered. Individual cells survive, perhaps because cell survival mechanisms are activated. Thus, global compromise of ER and mitochondrial integrity caused by ceramide accumulation in CERT mutant mice primarily affects organogenesis rather than causing cell death via apoptotic pathways.