To determine the physiological functions of the mammalian double-stranded RNA-binding protein PACT, the single-copy mouse Pact gene was disrupted and expression of the protein was completely ablated. The most notable phenotypes of the Pact–/– mouse were reduced size and severe microtia. As a result of the congenital abnormality of both outer and middle ears, these mice were hearing impaired. In situ hybridization revealed that PACT mRNA was expressed in specific regions of all three parts of the ear in adult and embryonic wild-type mice. Our study demonstrated an essential role of PACT in mammalian ear development and produced the first animal model for studying human microtia.