LCR-F1 is a mammalian bZIP transcription factor containing a basic amino acid domain highly homologous to a domain in the Drosophila Cap 'N' Collar and Caenorhabditis elegans SKN-1 proteins. LCR-F1 binds to AP1-like sequences in the human β-globin locus control region and activates high-level expression of β-globin genes. To assess the role of LCR-F1 in mammalian development, the mouse Lcrf1 gene was deleted in embryonic stem (ES) cells, and mice derived from these cells were mated to produce Lcrf1 null animals. Homozygous mutant embryos progressed normally to the late egg cylinder stage at -6.5 days post coitus (dpc), but development was arrested before 7.5 dpc. Lcrf1 mutant embryos failed to form a primitive streak and lacked detectable mesoderm. These results demonstrate that LCR-F1 is essential for gastrulation in the mouse and suggest that this transcription factor controls expression of genes critical for the earliest events in mesoderm formation. Interestingly, Lcrf1 null ES cells injected into wild-type blastocysts contributed to all mesodermally derived tissues examined, including erythroid cells producing hemoglobin. These results demonstrate that the Lcrf1 mutation is not cell autonomous and suggest that LCR-F1 regulates expression of signaling molecules essential for gastrulation. The synthesis of normal hemoglobin levels in erythroid cells of chimeras derived from Lcrf1 null cells suggests that LCR-F1 is not essential for globin gene expression. LCR- F1 and the related bZIP transcription factors NF-E2 p45 and NRF2 must compensate for each other in globin gene regulation.