Analysis of classical mouse mutations has been useful in the identification and study of many genes. We previously mapped Sox18, encoding an SRY-related transcription factor 1, to distal mouse chromosome 2 (ref. 2). This region contains a known mouse mutation, ragged (Ra), that affects the coat and vasculature 3, 4, 5. Here we have directly evaluated Sox18 as a candidate for Ra. We found that Sox18 is expressed in the developing vascular endothelium and hair follicles in mouse embryos. Furthermore, we found no recombination between Sox18 and Ra in an interspecific backcross segregating for the Ra phenotype. We found point mutations in Sox18 in two different Ra alleles that result in missense translation and premature truncation of the encoded protein. Fusion proteins containing these mutations lack the ability to activate transcription relative to wild-type controls in an in vitro assay. Our observations implicate mutations in Sox18 as the underlying cause of the Ra phenotype, and identify Sox18 as a critical gene for cardiovascular and hair follicle formation.