Developmental defects caused by targeted gene inactivation in mice are commonly subject to strain-specific modifiers that modulate the severity of the phenotype. Although several genetic modifier loci have been mapped in mice, the gene(s) residing at these loci are mostly unidentified, and the molecular mechanisms of modifier action remain poorly understood. Mutations in Sox18 cause a variable phenotype in the human congenital syndrome hypotrichosis-lymphedema-telangiectasia, and the phenotype of Sox18-null mice varies from essentially normal to completely devoid of lymphatic vasculature and lethal, depending on the strain of the mice, suggesting a crucial role for strain-specific modifiers in this system. Here we show that two closely related Group F Sox factors, SOX7 and SOX17, are able to functionally substitute for SOX18 in vitro and in vivo. SOX7 and SOX17 are not normally expressed during lymphatic development, excluding a conventional redundancy mechanism. Instead, these genes are activated specifically in the absence of SOX18 function, and only in certain strains. Our studies identify Sox7 and Sox17 as modifiers of the Sox18 mutant phenotype, and reveal their mechanism of action as a novel mode of strain-specific compensatory upregulation.