SUMO-specific protease 2 (SENP2) activities to remove SUMO from its substrates is essential for development of trophoblast stem cells, niches and lineages. Global deletion of SENP2 leads to midgestation lethality, and causes severe defects in the placenta which is accompanied by embryonic brain and heart abnormalities. Because of the placental deficiencies, the role of SENP2 in development of the embryonic tissues has not been properly determined. The brain and heart abnormalities may be secondary to placental insufficiency. Here we have created a new mouse strain permitting conditional inactivation of SENP2. Mice homozygous for germline deletion of the conditional allele exhibit trophoblast defects and embryonic abnormalities resembling the global SENP2 knockout. However, tissue-specific disruptions of SENP2 demonstrate its dispensable role in embryogenesis. Placental expression of SENP2 is necessary and sufficient for embryonic heart and brain development. Using a protease deficient model, we further demonstrate the requirement of SENP2-dependent SUMO modification in development of all major trophoblast lineages. SENP2 regulates sumoylation of Mdm2 which controls p53 activities critical for G-S transition of mitotic division and endoreduplication in trophoblast proliferation and differentiation, respectively. The differentiation of trophoblasts is also dependent on SENP2-mediated activation of p57(Kip2), a CDK-specific inhibitor required for endoreduplication.