Inhibins and activins are dimeric growth factors of the transforming growth factor-beta superfamily, a class of peptides that can regulate the growth and differentiation of a variety of cell types. Recently, activins have been implicated in early vertebrate development through their ability to evoke, in Xenopus embryo explants, both morphological and molecular changes characteristic of mesoderm induction. To understand these processes further, we have used homologous recombination in embryonic stem cells to create mouse strains carrying mutations in the gene encoding the activin/inhibin beta B subunit. These mice are expected to be deficient in activin B (beta B:beta B), activin AB (beta A:beta B), and inhibin B (alpha:beta B). Viable mutant animals were generated, indicating that the beta B subunit is not essential for mesoderm formation in the mouse. Mutant animals suffered, however, from distinct developmental and reproductive defects. An apparent failure of eyelid fusion during late embryonic development led to eye lesions in mutant animals. Whereas beta B-deficient males bred normally, mutant females manifested a profoundly impaired reproductive ability, characterized by perinatal lethality of their offspring. The phenotype of mutant mice suggests that activin beta B (1) plays a role in late fetal development and (2) is critical for female fecundity. In addition, we have found that expression of the related beta A subunit of activin is highly upregulated in ovaries of mutant females. Altered regulation of beta A activin in beta B-deficient mice may contribute to the mutant phenotype.