In utero exposure to diethylstilbestrol (DES) leads to patterning defects in the female reproductive tract (FRT) and a propensity to the development of vaginal adenocarcinomas in humans. In the mouse, DES treatment similarly induces a plethora of FRT developmental defects, including stratification of uterine epithelium and presence of glandular tissue in cervix and vagina. Uterine abnormalities are associated with repression of the homeobox gene Msx2, and DES leads to an altered uterine response in Msx2-mutants including a dilated uterine lumen. Here we investigate the role of Msx2 in normal vaginal development and in FRT response to DES. During vaginal development, Msx2 is required for transforming growth factor 2 (Tgf2) and Tgf3 expression and for proper vaginal epithelial differentiation. Moreover, Msx2 is involved in caudal Wolffian duct regression by promoting apoptosis. Consistently, neonatal DES exposure represses Msx2 expression in the Wolffian duct epithelium, and inhibits its apoptosis and subsequent regression. Intriguingly, although DES treatment also represses Msx2 expression in the vaginal epithelium, a much more severe DES-induced vaginal phenotype was observed in Msx2-mutant mice, including a complete failure of Müllerian vaginal epithelial stratification and a severely dilated vaginal lumen, accompanied by loss of p63 and water channel protein expression. These results demonstrate a critical role for Msx2 in counteracting the effect of DES on FRT patterning, and suggest that the response to DES may be highly variable depending on the genotype of an individual.