Furin, the mammalian prototype of a family of serine proteases, is required for ventral closure and axial rotation, and formation of the yolk sac vasculature. Here we show additionally that left-sided expression of pitx2 and lefty-2 are also perturbed in Furin-deficient embryos. These tissue abnormalities are preceded by a marked delay in the expansion of the definitive endoderm during gastrulation. Using a chimera approach, we show that Furin activity is required in epiblast derivatives, including the primitive heart, gut and extraembryonic mesoderm, whereas it is nonessential in the visceral endoderm. Thus, chimeric embryos, derived by injecting wild-type embryonic stem (ES) cells into fur(-/-) blastocysts, develop normally until at least 9.5 d.p.c. In contrast, Furin-deficient chimeras developing in the context of wild-type visceral endoderm fail to undergo ventral closure, axial rotation and yolk sac vascularization. Fur(-/-) cells are recruited into all tissues examined, including the yolk sac vasculature and the midgut, even though these structures fail to form in fur mutants. The presence of wild-type cells in the gut strikingly correlates with the ability of chimeric embryos to undergo turning. Overall, we conclude that Furin activity is essential in both extraembryonic and precardiac mesoderm, and in definitive endoderm derivatives.