Insulin-like growth factor 1 (IGF-1) is a pleiotropic factor involved in growth, cell survival and cellular differentiation. It exerts its functions through endocrine, paracrine or autocrine mechanisms. Circulating IGF-1 is essential for normal fetal and postnatal growth, although the published phenotypes of IGF-1 null animals have been only partially penetrant, presumably due to mixed genetic backgrounds. Molecular dissection of IGF-1 action is complicated by the existence of at least nine different IGF-1 isoforms, generated in both humans and rodents by usage of alternate promoters, differential splicing and different post-translational modifications. Several lines of evidence suggest that the Class 2 IGF-1 isoform is specifically destined for circulation, supporting an endocrine role of IGF-1 in normal growth processes. Using Cre/LoxP conditional gene targeting of exon 2 of the IGF-1 gene, we have generated a Class 2 IGF-1 knockout mouse line in a pure C57/Bl6 genetic background, where the specific removal of exon 2 ablated Class 2 IGF-1 isoform. Class 2 IGF-1 knockout mice exhibited normal development and postnatal growth patterns and had normal IGF-1 circulating levels, due to compensatory upregulation of Class 1 transcripts. In contrast, progeny of a total IGF-1 knockout line lacking exon 3 in the same genetic background were predictably smaller, displayed dramatically reduced IGF-1 receptor phosphorylation and all died perinatally, apparently due to respiratory failure. These results confirm that Class 2 signal peptide is not necessary for systemic circulation of IGF-1, revealing an internal compensation system for maintaining IGF-1 serum concentrations. We also uncover a vital requirement of IGF-1 for perinatal viability, previously obscured by modifiers in heterogeneous genetic backgrounds.