Cited2 is a transcriptional coactivator that is required for normal development of the embryo and placenta. Cited2-null mice die during gestation with fully penetrant heart defects and partially penetrant laterality defects. The laterality defects occur due to the loss of Nodal expression in the left lateral plate mesoderm (LPM). The cause of the heart defects that arise independently of laterality defects is unknown; they might occur due to an intrinsic requirement for Cited2 in the developing heart, or to disturbances in left-right patterning of the early embryo. Herein it is established that deletion of Cited2 from the heart progenitors does not alter development, and that heart defects in Cited2-null embryos arise due to an extra-cardiac requirement for Cited2 in establishing the left-right body axis. In addition, we provide evidence supporting a role for Cited2 in tissues of the embryo vital for left-right patterning (the node and LPM). Molecular and genetic analysis reveals that Cited2 is required for the initiation, but not propagation of, the left-sided determinant Nodal in the LPM. Moreover, a new role for Cited2 is identified as a potentiator of bone morphogenetic protein (BMP) signalling, counteracting the initiation of Nodal expression in the LPM. These data define Cited2 as a key regulator of left-right patterning in the mammalian embryo, and reveal that the role of Cited2 in cardiac development lies in its extra-cardiac functions. The clinical relevance of these findings lies in the fact that heterozygous mutation of human CITED2 is associated with congenital heart disease and laterality defects.