Mouse embryos lacking Lhx1 (Lim1) activity display defective gastrulation and are deficient of primordial germ cells (PGCs)(Tsang et al.[2001] International Journal of Developmental Biology 45: 549–555). To dissect the specific role of Lhx1 in germ cell development, we studied embryos with conditional inactivation of Lhx1 activity in epiblast derivatives, which, in contrast to completely null embryos, develop normally through gastrulation before manifesting a head truncation phenotype. Initially, PGCs are localized properly to the definitive endoderm of the posterior gut in the conditional mutant embryos, but they depart from the embryonic gut prematurely. The early exit of PGCs from the gut is accompanied by the failure to maintain a strong expression of Ifitm1 in the mesoderm enveloping the gut, which may mediate the repulsive activity that facilitates the retention of PGCs in the hindgut during early organogenesis. Lhx1 therefore may influence the localization of PGCs by modulating Ifitm1-mediated repulsive activity. Developmental Dynamics 239: 2851–2859, 2010. VC 2010 Wiley-Liss, Inc.