Defects in cardiac neural crest lead to congenital heart disease through failure of cardiac outflow tract and ventricular septation. In this report, we demonstrate a previously unappreciated role for the transcription factor Ets1 in the regulation of cardiac neural crest development. When bred onto a C57BL/6 genetic background, Ets1^−/− mice have a nearly complete perinatal lethality. Histologic examination of Ets1^−/− embryos revealed a membranous ventricular septal defect and an abnormal nodule of cartilage within the heart. Lineage-tracing experiments in Ets1^−/− mice demonstrated that cells of the neural crest lineage form this cartilage nodule and do not complete their migration to the proximal aspects of the outflow tract endocardial cushions, resulting in the failure of membranous interventricular septum formation. Given previous studies demonstrating that the MEK/ERK pathway directly regulates Ets1 activity, we cultured embryonic hearts in the presence of the MEK inhibitor U0126 and found that U0126 induced intra-cardiac cartilage formation, suggesting the involvement of a MEK/ERK/Ets1 pathway in blocking chondrocyte differentiation of cardiac neural crest. Taken together, these results demonstrate that Ets1 is required to direct the proper migration and differentiation of cardiac neural crest in the formation of the interventricular septum, and therefore could play a role in the etiology of human congenital heart disease.