The extraembryonic ectoderm (ExE) is essential for mammalian placental formation and survival of the embryo in utero. We have obtained a mouse model lacking the ExE, by targeted deletion of the transcription factor Elf5. Although Elf5 mutant embryos implant and form an ectoplacental cone, no trophoblast stem (TS) cells can be derived, indicating that the absence of ExE is a result of the lack of TS cell maintenance. Embryos without ExE tissue are able to form the anterior visceral endoderm but fail to undergo gastrulation, demonstrating an essential role for the ExE in embryonic patterning during a defined window of development.