Phospholipase Cε is a novel class of phosphoinositide-specific phospholipase C, identified as a downstream effector of Ras and Rap small GTPases. We report here the first genetic analysis of its physiological function with mice whose phospholipase Cε is catalytically inactivated by gene targeting. The hearts of mice homozygous for the targeted allele develop congenital malformations of both the aortic and pulmonary valves, which cause a moderate to severe degree of regurgitation with mild stenosis and result in ventricular dilation. The malformation involves marked thickening of the valve leaflets, which seems to be caused by a defect in valve remodeling at the late stages of semilunar valvulogenesis. This phenotype has a remarkable resemblance to that of mice carrying an attenuated epidermal growth factor receptor or deficient in heparin-binding epidermal growth factor-like growth factor. Smad1/5/8, which is implicated in proliferation of the valve cells downstream of bone morphogenetic protein, shows aberrant activation at the margin of the developing semilunar valve tissues in embryos deficient in phospholipase Cε. These results suggest a crucial role of phospholipase Cε downstream of the epidermal growth factor receptor in controlling semilunar valvulogenesis through inhibition of bone morphogenetic protein signaling.