The Polycomb group (PcG) of genes was first identified in Drosophila as maintenance factors for long-term transcriptional repression of homeotic genes. In mice, the PcG protein Eed (Embryonic ectoderm development) is present in a distinct complex that interacts with histone deacetylase (HDAC) and the PcG member Ezh2 (Enhancer of zeste homolog 2), but not in the larger Polycomb repressive complex 1 (PRC1) formed by several other PcG proteins. eednull mutants manifest a distinct early gastrulation defect that occurs prior to homeotic gene expression. To determine whether Eed is also required for regulating homeotic genes, a later acting eedhypomorph mutation was analyzed. The anterior expression boundaries of several Hox genes were shifted rostrally by one segment, indicating that Eed is required for stable repression of homeotic genes. Furthermore, although the eednull/hypomorph compound heterozygotes die during mid-gestation stage, they did not show a more severe derepression of Hox genes than the eedhypomorph/hypomorph homozygotes. A detailed analysis of the mid-gestation lethality associated with the eednull/hypomorph compound heterozygotes revealed a novel function for eed in the development of secondary trophoblast giant cells during murine placenta formation. Tetraploid rescue experiments demonstrated that the defect is cell autonomous in the extraembryonic lineage. Mash2, a paternally imprinted gene important for trophoblast development, was ectopically expressed in the eed mutants. However, genetic crosses with a Mash2 null allele suggested that Eed was not required to maintain Mash2 imprinting, but could be required in a lineage specific fashion to suppress Mash2 expression.