The pacemaker is composed of specialized cardiomyocytes located within the sinoatrial node (SAN), and is responsible for originating and regulating the heart beat. Recent advances towards understanding the SAN development have been made on the genetic control and gene interaction within this structure. Here we report that the Shox2 homeodomain transcription factor is restrictedly expressed in the sinus venosus region including the SAN and the sinus valves during embryonic heart development. Shox2 null mutation results in embryonic lethality due to cardiovascular defects, including an abnormal low heart beat rate (bradycardia) and severely hypoplastic SAN and sinus valves attributed to a significantly decreased level of cell proliferation. Genetically, the lack of Tbx3 and Hcn4 expression, along with ectopic activation of Nppa, Cx40, and Nkx2-5 in the Shox2^−/− SAN region, indicates a failure in SAN differentiation. Furthermore, Shox2 overexpression in Xenopus embryos results in extensive repression of Nkx2-5 in the developing heart, leading to a reduced cardiac field and aberrant heart formation. Reporter gene expression assays provide additional evidence for the repression of Nkx2-5 promoter activity by Shox2. Taken together our results demonstrate that Shox2 plays an essential role in the SAN and pacemaker development by controlling a genetic cascade through the repression of Nkx2-5.