The ubiquitously expressed basic helix-loop-helix (bHLH)-PAS protein ARNT (arylhydrocarbon receptor nuclear transporter) forms transcriptionally active heterodimers with a variety of other bHLH-PAS proteins, including HIF-1alpha (hypoxia-inducible factor-1alpha) and AHR (arylhydrocarbon receptor). These complexes regulate gene expression in response to hypoxia and xenobiotics, respectively, and mutation of the murine Arnt locus results in embryonic death by day 10.5 associated with placental, vascular, and hematopoietic defects. The closely related protein ARNT2 is highly expressed in the central nervous system and kidney and also forms complexes with HIF-1alpha and AHR. To assess unique roles for ARNT2 in development, and reveal potential functional overlap with ARNT, we generated a targeted null mutation of the murine Arnt2 locus. Arnt2(-/-) embryos die perinatally and exhibit impaired hypothalamic development, phenotypes previously observed for a targeted mutation in the murine bHLH-PAS gene Sim1 (Single-minded 1), and consistent with the recent proposal that ARNT2 and SIM1 form an essential heterodimer in vivo [Michaud, J. L., DeRossi, C., May, N. R., Holdener, B. C. & Fan, C. (2000) Mech. Dev. 90, 253-261]. In addition, cultured Arnt2(-/-) neurons display decreased hypoxic induction of HIF-1 target genes, demonstrating formally that ARNT2/HIF-1alpha complexes regulate oxygen-responsive genes. Finally, a strong genetic interaction between Arnt and Arnt2 mutations was observed, indicating that either gene can fulfill essential functions in a dose-dependent manner before embryonic day 8.5. These results demonstrate that Arnt and Arnt2 have both unique and overlapping essential functions in embryonic development.