Although the trophoblast is necessary for the growth, viability and patterning of the mammalian embryo, understanding of its patterning role is still rudimentary. Expression of the transcription factor Ets2 is restricted to the trophoblast in early postimplantation stages and Ets2 mutants have been previously shown to have defects in trophoblast development. We show here that Ets2 is necessary in the trophoblast for fundamental aspects of anteroposterior (AP) epiblast axis initiation, including mesoderm initiation at the primitive streak,establishment of posterior character in the epiblast and appropriate spatial restriction of the anterior visceral endoderm (AVE). Most homozygous Ets2 mutants also show highly reduced development of the trophoblast with an absence of extraembryonic ectoderm (EXE) markers. Embryos in which the EXE has been physically removed before culture in vitro phenocopy the patterning defects of Ets2 mutants. These defects cannot be rescued by providing Ets2 mutants with wild-type epiblast in tetraploid aggregations. Thus, EXE-derived signals are necessary for normal embryonic patterning. Ets2 is likely to be required in the EXE downstream of epiblast signals, such as Fgf, and, in turn, helps to regulate signals from the EXE that signal back to the epiblast to promote proper primitive streak and AVE development. This study provides new insights about the genetic and cellular basis of the patterning role and development of the early trophoblast.