The transmembrane ligand ephrinB2 and its cognate Eph receptor tyrosine kinases are important regulators of embryonic blood vascular morphogenesis. However, the molecular mechanisms required for ephrinB2 transduced cellular signaling in vivo have not been characterized. To address this question, we generated two sets of knock-in mice: ephrinB2^ΔV mice expressed ephrinB2 lacking the C-terminal PDZ interaction site, and ephrinB2^5F mice expressed ephrinB2 in which the five conserved tyrosine residues were replaced by phenylalanine to disrupt phosphotyrosine-dependent signaling events. Our analysis revealed that the homozygous mutant mice survived the requirement of ephrinB2 in embryonic blood vascular remodeling. However, ephrinB2^ΔV/ΔV mice exhibited major lymphatic defects, including a failure to remodel their primary lymphatic capillary plexus into a hierarchical vessel network, hyperplasia, and lack of luminal valve formation. Unexpectedly, ephrinB2^5F/5F mice displayed only a mild lymphatic phenotype. Our studies define ephrinB2 as an essential regulator of lymphatic development and indicate that interactions with PDZ domain effectors are required to mediate its functions.