Heparin-binding epidermal growth factor (HB-EGF) and betacellulin (BTC) are activating ligands for EGF receptor (EGFR/ErbB1) and ErbB4. To identify their physiological functions, we disrupted mouse HB-EGF and BTC alleles by homologous recombination. Most HB-EGF(-/-) mice died before weaning, and survivors had enlarged, dysfunctional hearts and reduced lifespans. Although BTC(-/-) mice were viable and fertile and displayed no overt defects, the lifespan of double null HB-EGF(-/-)/BTC(-/-) mice was further reduced, apparently due to accelerated heart failure. HB-EGF(-/-) newborns had enlarged and malformed semilunar and atrioventricular heart valves, and hypoplastic, poorly differentiated lungs. Defective cardiac valvulogenesis was the result of abnormal mesenchymal cell proliferation during remodeling, and was associated with dramatic increases in activated Smad1/5/8. Consistent with the phenotype, HB-EGF transcripts were localized to endocardial cells lining the margins of wild-type valves. Similarly defective valvulogenesis was observed in newborn mice lacking EGFR and tumor necrosis factor-alpha converting enzyme (TACE). These results suggest that cardiac valvulogenesis is dependent on EGFR activation by TACE-derived soluble HB-EGF, and that EGFR signaling is required to regulate bone morphogenetic protein signaling in this context.