Protein phosphatase 2A (PP2A) is a multimeric enzyme, containing a catalytic subunit complexed with two regulatory subunits. The catalytic subunit PP2A C is encoded by two distinct and unlinked genes, termed Cα and Cβ. The specific function of these two catalytic subunits is unknown. To address the possible redundancy between PP2A and related phosphatases as well as between Cα and Cβ, the Cα subunit gene was deleted by homologous recombination. Homozygous null mutant mice are embryonically lethal, demonstrating that the Cα subunit gene is an essential gene. As PP2A exerts a range of cellular functions including cell cycle regulation and cell fate determination, we were surprised to find that these embryos develop normally until postimplantation, around embryonic day 5.5/6.0. While no Cα protein is expressed, we find comparable expression levels of PP2A C at a time when the embryo is degenerating. Despite a 97% amino acid identity, Cβ cannot completely compensate for the absence of Cα. Degenerated embryos can be recovered even at embryonic day 13.5, indicating that although embryonic tissue is still capable of proliferating, normal differentiation is significantly impaired. While the primary germ layers ectoderm and endoderm are formed, mesoderm is not formed in degenerating embryos.