The TEL gene, which is frequently rearranged in human leukemias of both myeloid and lymphoid origin, encodes a member of the Ets family of transcription factors. The TEL gene is widely expressed throughout embryonic development and in the adult. To determine the requirement for the TEL gene product in development we generated TEL knockout mice (TEL-/-) by gene targeting in embryonic stem cells. TEL-/- mice are embryonic lethal and die between E10.5-11.5 with defective yolk sac angiogenesis and intra-embryonic apoptosis of mesenchymal and neural cells. Two-thirds of TEL-deficient yolk sacs at E9.5 lack vitelline vessels, yet possess capillaries, indicative of normal vasculogenesis. Vitelline vessels regress by E10.5 in the remaining TEL-/- yolk sacs. Hematopoiesis at the yolk sac stage, however, appears unaffected in TEL-/- embryos. Our findings demonstrate that TEL is required for maintenance of the developing vascular network in the yolk sac and for survival of selected cell types within the embryo proper.