Smooth muscle gene expression is required for the proper development and function of multiple organ systems. Expression of smooth muscle genes is critical for contractile function and tissue architectural integrity. One critical transcription factor for smooth muscle gene expression is the Serum Response Factor (SRF). SRF is expressed ubiquitously, but tissue‐specific transcriptional regulation is conferred by its binding to cofactors such as myocardin. Myocardin‐related transcription factor B (MRTF‐B) is a member of a family of genes (Myocardin(Myocd),Myocardin‐related transcription factor A(MRTF‐A),MRTF‐B) that provides tissue‐specificity and potentiate SRF‐dependent transcription. Unlike myocardin, which is expressed specifically in smooth and cardiac muscle, MRTF‐B is expressed in a wide variety of tissues. To examine the function of MRTF‐B, we generated mice containing an insertional mutation of MRTF‐B. MRTF‐B homozygous mutants die in late gestation with vascular defects and liver hemorrhage. At E9.5, MRTF‐B is expressed strongly in the septum transversum mesoderm critical for development of the vitelline system that produces the liver sinusoids and portal venous system. MRTF‐B deficiency results in defective smooth muscle gene expression in the liver sinusoids, vitelline veins, and yolk sac, which contributes significantly to the lethal phenotype. These data support our hypothesis that MRTF‐B has a unique role in regulating smooth muscle genes important for liver, yolk sac, and portal vascular development. Developmental Dynamics 236:416–425, 2007. © 2006 Wiley‐Liss, Inc.