Heparin-binding epidermal growth factor (EGF)-like growth factor (HBEGF) is expressed in the embryo and uterus at the implantation site, stimulating trophoblast invasive activity essential for placentation. The effect of extraembryonic HBEGF deficiency on placental development was investigated by breeding mice heterozygous for the Hbegf null mutation. On gestation day 13.5, the average placental weights of the wild-type (Hbegf+/+) and heterozygous (Hbegf+/-) mice were approximately 76 and 77 mg, respectively, as opposed to reduced average placental weights of approximately 61 mg in homozygous null (Hbgef-/-) females. In contrast, fetal weights were not significantly affected by genotype. HBEGF immunostaining in placental sections was Hbegf gene dosage-dependent, while expression of other EGF family members was comparable in Hbegf+/+ and Hbegf-/- placentas. Histological analysis revealed no apparent differences in trophoblast giant cells, but the spongiotrophoblast region was reduced compared to labyrinth (P < 0.05) in Hbegf null placentas. While no differences in cell apoptosis were noted, proliferation as assessed by nuclear Ki67 staining was elevated in the labyrinth and decreased in the spongiotrophoblast region of Hbegf-/- placentas. Labyrinth morphology appeared disrupted in Hbegf -/- placentas stained with laminin, a marker for capillary basement membrane, and the capillary density was reduced. Immunohistochemical staining revealed reduced vascular endothelial growth factor (VEGF) levels in both spongiotrophoblast and labyrinth (P < 0.01) regions of Hbegf-/- placentas. In vitro, HBEGF supplementation increases the expression of VEGF in a human trophoblast cell line. These findings suggest that trophoblast HBEGF promotes placental capillary formation by inducing VEGF in the developing placenta of mice.