Protein phosphatases regulate a wide array of proteins through post-translational modification and are required for a plethora of intracellular events in eukaryotes. While some core components of the protein phosphatase complexes are well characterized, many subunits of these large complexes remain unstudied. Here we characterize a murine loss-of-function allele of the protein phosphatase 1 regulatory subunit 35 (Ppp1r35) gene. Homozygous embryos lacking Ppp1r35 initiate developmental delay beginning at E7.5 and have obvious morphological defects at slightly later stages. Mutant embryos do not initiate turning and fail to progress beyond the size and relative development of an E8.5 embryo. Consistent with recent in vitro studies linking PPP1R35 with the microcephaly protein Rotatin and a role in centrosome elongation, we find that the Ppp1r35 mutant embryos lack primary cilia. Histological and molecular analysis of Ppp1r35 mutants revealed that notochord development is irregular and discontinuous and that the floor plate of the neural tube is not specified, consistent with defects in primary cilia. Similar to other mutant embryos with defects in centriole function, Ppp1r35 mutants display increased cell death that is prevalent in the neural tube and an increased number of proliferative cells in prometaphase. We hypothesize that loss of Ppp1r35 function abrogates centriole homeostasis, resulting in both a failure to produce functional primary cilia and cell death and/or cell cycle delay that leads to embryonic lethality. Taken together, these results highlight the essential function of Ppp1r35 during early mammalian development and implicate this gene as a candidate for human microcephaly.