By comparing mammalian genomes, we and others have identified actively transcribed Ty3/gypsy retrotransposon-derived genes with highly conserved DNA sequences and insertion sites^,,,,,. To elucidate the functions of evolutionarily conserved retrotransposon-derived genes in mammalian development, we produced mice that lack one of these genes, Peg10 (paternally expressed 10)^,,,, which is a paternally expressed imprinted gene on mouse proximal chromosome 6. The Peg10 knockout mice showed early embryonic lethality owing to defects in the placenta. This indicates that Peg10 is critical for mouse parthenogenetic development and provides the first direct evidence of an essential role of an evolutionarily conserved retrotransposon-derived gene in mammalian development.