Smg1 is a PI3K-related kinase (PIKK) associated with multiple cellular functions, including DNA damage responses, telomere maintenance, and nonsense-mediated mRNA decay (NMD). NMD degrades transcripts that harbor premature termination codons (PTCs) as a result of events such as mutation or alternative splicing (AS). Recognition of PTCs during NMD requires the action of the Upstream frameshift protein Upf1, which must first be phosphorylated by Smg1. However, the physiological function of mammalian Smg1 is not known. By using a gene-trap model of Smg1 deficiency, we show that this kinase is essential for mouse embryogenesis such that Smg1 loss is lethal at embryonic day 8.5. High-throughput RNA sequencing (RNA-Seq) of RNA from cells of Smg1-deficient embryos revealed that Smg1 depletion led to pronounced accumulation of PTC-containing splice variant transcripts from approximately 9% of genes predicted to contain AS events capable of eliciting NMD. Among these genes are those involved in splicing itself, as well as genes not previously known to be subject to AS-coupled NMD, including several involved in transcription, intracellular signaling, membrane dynamics, cell death, and metabolism. Our results demonstrate a critical role for Smg1 in early mouse development and link the loss of this NMD factor to major and widespread changes in the mammalian transcriptome.