The 90 kDa heat-shock proteins (HSP90s) play important roles during stress situations as general chaperones and under physiological conditions in the conformational activation of specific protein substrates. Vertebrates express two cytosolic HSP90s (HSP90alpha and HSP90beta) ubiquitously. We have mutated the Hsp90beta gene in murine embryonic stem cells and generated Hsp90beta mutant mice. Heterozygous animals were phenotypically normal. Interestingly, homozygous embryos developed normally until embryonic day 9.0/9.5. Then, although Hsp90beta is expressed ubiquitously, they exhibited phenotypic abnormalities restricted to the placenta. The mutant concepti failed to form a fetal placental labyrinth and died a day later. Fusion between the allantois and the chorionic plate occurred, allantoic blood vessels invaded the chorion, but then did not expand. Mutant trophoblast cells failed to differentiate into trilaminar labyrinthine trophoblast. Despite conspicuous similarities between HSP90alpha and HSP90beta at the molecular level, our data suggest that HSP90beta has a key role in placenta development that cannot be performed by the endogenous HSP90alpha alone. Analysis of chimeric concepti consisting of mutant embryos and tetraploid embryos or ES cells revealed that wild-type allantois was able to induce mutant trophoblast to differentiate. In contrast, trophoblast wild type at the Hsp90beta locus was unable to differentiate when in contact with mutant allantois. Therefore, the primary defect caused by the Hsp90beta mutation resided in the allantois. The allantois mesoderm is thought to induce trophoblast differentiation. Our results show that Hsp90beta is a necessary component of this induction process.