Nuclear factor of activated T cells 5 protein (NFAT5) is thought to be important for cellular adaptation to osmotic stress by regulating the transcription of genes responsible for the synthesis or transport of organic osmolytes. It is also thought to play a role in immune function, myogenesis and cancer invasion. To better understand the function of NFAT5, we developed NFAT5 gene knockout mice. Homozygous NFAT5 null (NFAT5(-/-)) mouse embryos failed to develop normally and died after 14.5 days of embryonic development (E14.5). The embryos showed peripheral edema, and abnormal heart development as indicated by thinner ventricular wall and reduced cell density at the compact and trabecular areas of myocardium. This is associated with reduced level of proliferating cell nuclear antigen and increased caspase-3 in these tissues. Cardiomyocytes from E14.5 NFAT5(-/-) embryos showed a significant reduction of beating rate and abnormal Ca(2+) signaling profile as a consequence of reduced sarco(endo)plasmic reticulum Ca(2+)-ATPase (SERCA) and ryanodine receptor (RyR) expressions. Expression of NFAT5 target genes, such as HSP 70 and SMIT were reduced in NFAT5(-/-) cardiomyocytes. Our findings demonstrated an essential role of NFAT5 in cardiac development and Ca(2+) signaling. Cardiac failure is most likely responsible for the peripheral edema and death of NFAT5(-/-) embryos at E14.5 days.