MBD2 and MBD3 are closely related proteins with consensus methyl-CpG binding domains. MBD2 is a transcriptional repressor that specifically binds to methylated DNA and is a component of the MeCP1 protein complex. In contrast, MBD3 fails to bind methylated DNA in murine cells, and is a component of the Mi-2/NuRD corepressor complex. We show by gene targeting that the two proteins are not functionally redundant in mice, as Mbd3-/- mice die during early embryogenesis, whereas Mbd2-/- mice are viable and fertile. Maternal behavior of Mbd2-/- mice is however defective and, at the molecular level, Mbd2-/- mice lack a component of MeCP1. Mbd2-mutant cells fail to fully silence transcription from exogenous methylated templates, but inappropriate activation of endogenous imprinted genes or retroviral sequences was not detected. Despite their differences, Mbd3 and Mbd2 interact genetically suggesting a functional relationship. Genetic and biochemical data together favor the view that MBD3 is a key component of the Mi-2/NuRD corepressor complex, whereas MBD2 may be one of several factors that can recruit this complex to DNA.