GATA-6 is a zinc-finger transcription factor essential for early embryogenesis. Ablation of GATA-6 in mice impairs endoderm differentiation and causes apoptosis of epiblast cells. The endoderm defects have been attributed to the loss of HNF4, disabled-2, and GATA-4. However, the mechanisms underlying epiblast apoptosis are unclear. In this study we used mouse embryonic stem cell-derived embryoid bodies (EBs) as a model for peri-implantation development and found that ablation of GATA-6 causes massive apoptosis during EB differentiation. Endoderm grafting experiments and ectopic basement membrane (BM) assembly suggest that both BM and non-BM factors contribute to cell survival. Furthermore, the increased cell death in mutant EBs is accompanied by reduced expression of bone morphogenetic protein 2 (BMP-2). Chromatin immunoprecipitation reveals direct binding of GATA-6 to the Bmp2 promoter. Treatment of the mutant EBs with BMP-2 markedly suppresses apoptosis, whereas stable overexpression of the BMP antagonist noggin or a dominant-negative BMP receptor in normal EBs leads to increased apoptosis. Last, activation of SMAD1/5 by phosphorylation is significantly inhibited in the absence of GATA-6, and this is reversed by exogenous BMP-2. Treatment of normal EBs with SMAD phosphorylation inhibitor increases apoptosis. Collectively these results suggest that GATA-6 promotes cell survival by regulating endoderm expression of BMP-2 and BM during embryonic epithelial morphogenesis.