The c-fes protooncogene encodes a nonreceptor tyrosine kinase (Fes) implicated in cytokine receptor signal transduction, granulocyte survival, and myeloid differentiation. To study the role of c-fes during myelopoiesis, we generated embryonic stem (ES) cells with a targeted disruption of the c-fes locus. Targeted mutagenesis deletes the C-terminal SH2 and tyrosine kinase domains of c-fes (referred to as c-fes(Delta c/Delta c)). We demonstrate that the c-fes(Delta c/Delta c) allele results in a truncated Fes protein that retains the N-terminal oligomerization domain, but lacks both the SH2 and the tyrosine kinase domain. In vitro differentiation of c-fes(Delta c/Delta c) ES cells results in hyperproliferation of an early myeloid cell. Generation of c-fes(Delta c/Delta c) mutant chimeric mice causes lethality by E13.5 with embryos exhibiting pleiotropic defects, the most striking being cardiovascular abnormalities. These results establish that c-fes is an important regulator of myeloid cell proliferation and embryonic development.