The eukaryotic Y-box-binding protein-1 (YB-1) is involved in the transcriptional and translational control of many biological processes, including cell proliferation. In clinical studies, the cellular level of YB-1 closely correlates with tumor growth and prognosis. To understand the role of YB-1 in vivo, especially in the developmental process, we generated YB-1 knock-out mice, which are embryonic lethal and exhibit exencephaly associated with abnormal patterns of cell proliferation within the neuroepithelium. beta-Actin expression and F-actin formation were reduced in the YB-1 null embryo and YB-1(-/-) mouse embryonic fibroblasts, suggesting that the neural tube defect is caused by abnormal cell morphology and actin assembly within the neuroepithelium. Fibroblasts derived from YB-1(-/-) embryos demonstrated reduced growth and cell density. A colony formation assay showed that YB-1(-/-) mouse embryonic fibroblasts failed to undergo morphological transformation and remained contact-inhibited in culture. These results demonstrate that YB-1 is involved in early mouse development, including neural tube closure and cell proliferation.