Dicer is a multi-domain protein responsible for the generation of short interfering RNAs (siRNAs) from long double-stranded RNAs during RNA interference. It is also involved in the maturation of microRNAs, some of which are transcriptional regulators of developmental timing in nematodes. To assess the role of Dicer in mammals, we generated Dicerex1/2 mice with a deletion of the amino acid sequences corresponding to the first and second exons of the dicer gene via homologous recombination. We found that Dicerex1/2 homozygous embryos displayed a retarded phenotype and died between days 12.5 and 14.5 of gestation. Thus, these results show that dicerex1/2 is severely hypomorphic and that Dicer is essential for normal mouse development. Interestingly, we also found that blood vessel formation/maintenance in dicerex1/2 embryos and yolk sacs were severely compromised, suggesting a possible role for Dicer in angiogenesis. This finding is consistent with the altered expression of vegf, flt1, kdr, and tie1 in the mutant embryos. Taken together, the results of this study indicate that Dicer exerts its function on mouse embryonic angiogenesis probably through its role in the processing of microRNAs that regulate the expression levels of some critical angiogenic regulators in the cell.