The serine protease CAP1/Prss8 is crucial for skin barrier function, lung alveolar fluid clearance and has been unveiled as diagnostic marker for specific cancer types. Here, we show that a constitutive knockout of CAP1/Prss8 leads to embryonic lethality. These embryos presented no specific defects, but it is during this period, and in particular at E13.5, that wildtype placentas show an increased expression of CAP1/Prss8, thus suggesting a placental defect in the knockout situation. The placentas of knockout embryos exhibited significantly reduced vascular development and incomplete cellular maturation. In contrary, epiblast-specific deletion of CAP1/Prss8 allowed development until birth. These CAP1/Prss8-deficient newborns presented abnormal epidermis, and died soon after birth due to impaired skin function. We thus conclude that a late placental insufficiency might be the primary cause of embryonic lethality in CAP1/Prss8 knockouts. This study highlights a novel and crucial role for CAP1/Prss8 in placental development and function.