Two types of mutant allele, one leaky and one null, have been generated by gene targeting at the N-myc locus in embryonic stem cells and the phenotypes of mice homozygous for these mutations have been described. These mutations have shown that N-myc has a number of functions during development, including a role in branching morphogenesis in the lung, which manifests itself at birth in mice homozygous for the leaky allele, and roles in the development of the mesonephric tubules, the neuroepithelium, the sensory ganglia, the gut and the heart, which become evident at midgestation in embryos homozygous for the null allele. In an attempt to define roles for N-myc at other stages of development, we have combined the two types of N-myc mutant allele in a compound heterozygote that as a result contains approximately 15% of normal levels of N-Myc protein. Compound heterozygotes died during gestation at a time intermediate to the times of death of embryos homozygous for either mutation individually, and their death appeared to result from cardiac failure stemming from hypoplasia of the compact subepicardial layer of the myocardium. Investigation of the expression pattern of N-myc and various markers of differentiation in wild-type and compound heterozygote mutant hearts has suggested that N-myc may function in maintaining the proliferation and/or preventing the differentiation of compact layer myocytes. This study illustrates the importance of generating different mutations at a given locus to elucidate fully the function of a particular gene during development.