Plakoglobin, a protein belonging to the Armadillo-repeat gene family, is the only component that adherens junctions and desmosomes have in common. Plakoglobin null-mutant mouse embryos die because of severe heart defects and may exhibit an additional skin phenotype, depending on the genetic background. Lack of plakoglobin affects the number and structure of desmosomes, resulting in visible defects when cells are subjected to increasing mechanical stress, e.g. when embryonic blood starts circulating or during skin differentiation. By analysing plakoglobin-negative embryonic skin differentiation in more detail, we show here that, in the absence of plakoglobin, its closest homologue, beta-catenin, becomes localized to desmosomes and associated with desmoglein. This substitution may account for the relatively late appearance of the developmental defects seen in plakoglobin null-mutant embryos. beta-catenin cannot, however, fully compensate a lack of plakoglobin. In the absence of plakoglobin, there was reduced cell-cell adhesion, resulting in large intercellular spaces between keratinocytes, subcorneal acantholysis and necrosis in the granular layer of the skin. Electron microscopic analysis documented a reduced number of desmosomes, and those present lacked the inner dense plaque and had fewer keratin filaments anchored. Our analysis underlines the central role of plakoglobin for desmosomal assembly and function during embryogenesis.