Activity-regulated, cytoskeleton-associated protein (Arc) was first identified as an immediate-early gene regulated by synaptic activity. We have studied its functional role in vivo using a gene-targeting approach. We found that Arc is encoded by a single exon, and Arc mRNA is ubiquitously expressed in early mouse embryos. Homozygous Arc mutants are severely growth-retarded, fail to gastrulate and subsequently die before day 8.5 of embryogenesis. Further analysis revealed severe disorganization of visceral endoderm formation, and total separation and ectopic location of embryonic and extraembryonic structure. These findings demonstrate that Arc function is essential for early embryo development and patterning in mice, and support the hypothesis that signaling from visceral endoderm is essential for normal patterning of the extraembryonic and embryonic structure.