Members of the LEF-1/TCF family of transcription factors have been implicated in the transduction of Wnt signals. However, targeted gene inactivations of Lef1, Tcf1, or Tcf4 in the mouse do not produce phenotypes that mimic any known Wnt mutation. Here we show that null mutations in both Lef1 and Tcf1, which are expressed in an overlapping pattern in the early mouse embryo, cause a severe defect in the differentiation of paraxial mesoderm and lead to the formation of additional neural tubes, phenotypes identical to those reported for Wnt3a-deficient mice. In addition, Lef1(-/-)Tcf1(-/-) embryos have defects in the formation of the placenta and in the development of limb buds, which fail both to express Fgf8 and to form an apical ectodermal ridge. Together, these data provide evidence for a redundant role of LEF-1 and TCF-1 in Wnt signaling during mouse development.