Nonsense-mediated RNA decay (NMD) is a highly conserved RNA turnover pathway that degrades RNAs harboring in-frame stop codons in specific contexts. Loss of NMD factors leads to embryonic lethality in organisms spanning the phylogenetic scale, but the mechanism remains unknown. Here, we report that the core NMD factor, UPF2, is required for expansion of epiblast cells within the inner cell mass of mice in vivo. We identify NMD target mRNAs in mouse blastocysts – both canonical and alternatively processed mRNAs – including those encoding cell cycle arrest and apoptosis factors, raising the possibility that NMD is essential for embryonic cell proliferation and survival. In support, the inner cell mass of Upf2-null blastocysts rapidly regresses with outgrowth and is incompetent for embryonic stem cell derivation in vitro. In addition, we uncovered concordant temporal- and lineage-specific regulation of NMD factors and mRNA targets, indicative of a shift in NMD magnitude during peri-implantation development. Together, our results reveal developmental and molecular functions of the NMD pathway in the early embryo.