In most mammals, placentation is critical for fetal development and pregnancy success. Exposure to marijuana during pregnancy has adverse effects, but whether the placenta is a target of cannabinoid/endocannabinoid signaling is not known. Using mice as a model system, we found that the endocannabinoid system is present in the ectoplacental cone and spongiotrophoblast cells. We also observed that aberrant endocannabinoid signaling confers premature trophoblast stem cell differentiation, and defective trophoblast development and invasion. These defects are reflected in retarded fetal development and compromised pregnancy outcome. Because the endocannabinoid system is conserved in mice and humans, our study suggests that endocannabinoid signaling is critical to placentation and pregnancy success in humans and implicates its potential significance in stem cell biology.