PHD1, PHD2, and PHD3 are prolyl hydroxylase domain proteins that regulate the stability of hypoxia-inducible factor alpha subunits (HIF-alpha). To determine the roles of individual PHDs during mouse development, we disrupted all three Phd genes and found that Phd2(-/-) embryos died between embryonic days 12.5 and 14.5 whereas Phd1(-/-) or Phd3(-/-) mice were apparently normal. In Phd2(-/-) mice, severe placental and heart defects preceded embryonic death. Placental defects included significantly reduced labyrinthine branching morphogenesis, widespread penetration of the labyrinth by spongiotrophoblasts, and abnormal distribution of trophoblast giant cells. The expression of several trophoblast markers was also altered, including an increase in the spongiotrophoblast marker Mash2 and decreases in the labyrinthine markers Tfeb and Gcm1. In the heart, trabeculae were poorly developed, the myocardium was remarkably thinner, and interventricular septum was incompletely formed. Surprisingly, while there were significant global increases in HIF-alpha protein levels in the placenta and the embryo proper, there was no specific HIF-alpha increase in the heart. Taken together, these data indicate that among all three PHD proteins, PHD2 is uniquely essential during mouse embryogenesis.