The homeobox gene Hhex has recently been shown to be essential for normal liver, thyroid and forebrain development. Hhex(-/-) mice die by mid-gestation (E14.5) and the cause of their early demise remains unclear. Because Hhex is expressed in the developing blood islands at E7.0 in the endothelium of the developing vasculature and heart at E9.0-9.5, and in the ventral foregut endoderm at E8.5-9.0, it has been postulated to play a critical role in heart and vascular development. We show here, for the first time, that a null mutation of Hhex results in striking abnormalities of cardiac and vascular development which include: (1) defective vasculogenesis, (2) hypoplasia of the right ventricle, (3) overabundant endocardial cushions accompanied by ventricular septal defects, outflow tract abnormalities and atrio-ventricular (AV) valve dysplasia and (4) aberrant development of the compact myocardium. The dramatic enlargement of the endocardial cushions in the absence of Hhex is due to decreased apoptosis and dysregulated epithelial-mesenchymal transformation (EMT). Interestingly, vascular endothelial growth factor A (Vegfa) levels in the hearts of Hhex(-/-) mice were elevated as much as three-fold between E9.5 and E11.5, and treatment of cultured Hhex(-/-) AV explants with truncated soluble Vegfa receptor 1, sFlt-1, an inhibitor of Vegf signaling, completely abolished the excessive epithelial-mesenchymal transformation seen in the absence of Hhex. Therefore, Hhex expression in the ventral foregut endoderm and/or the endothelium is necessary for normal cardiovascular development in vivo, and one function of Hhex is to repress Vegfa levels during development.