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SHP-2 is a protein tyrosine phosphatase that has been shown to be required for proper vertebrate embryogenesis. Loss of function studies demonstrate roles for SHP-2 in gastrulation, cell migration, and the maintenance of trophoblast stem cells and results in lethality prior to or during gastrulation. In addition to the requirement for SHP-2 during early vertebrate development, there is also a requirement for SHP-2 during heart development which is supported by studies showing patients with Noonan syndrome often having mis-sense mutations in Shp-2. To date the mechanism leading to abnormal cardiac development in Noonan syndrome patients has not been determined. We have examined the effects of SHP-2 inhibition and of human mis-sense mutations of Shp-2 on early heart development using Xenopus. We find that in the absence of SHP-2 signaling, cardiac progenitor cells down-regulate genes associated with early heart development and fail to initiate cardiac differentiation. We further show that this requirement for SHP-2 is restricted to cardiac precursor cells undergoing active proliferation. By demonstrating that SHP-2 is phosphorylated on Y542/Y580 and that it binds to FRS-2, an effector of FGF signaling, we place SHP-2 in the FGF pathway during early embryonic heart development. Furthermore, we demonstrate that inhibition of FGF signaling mimics the cellular and biochemical effects of SHP-2 inhibition and that these effects can be rescued by constitutively active/Noonan syndrome associated forms of SHP-2. We also find that N308D, a Shp-2 mutation associated with Noonan Syndrome, leads to cardiac abnormalities in Xenopus. Characterization of the phenotypic defects in these hearts show that they are reduced in size and display delayed morphological movements. These cardiac abnormalities appear to be associated with alterations in the actin cytoskeleton. In addition, we also observed a dramatic increase in the number of cells in M-phase of the cell cycle without an increase in cell number. These defects appear to reflect lengthening of the cardiac cell cycle. Collectively, these results show that SHP-2 functions within the FGF/MAPK pathway to maintain survival of proliferating populations of cells and that Shp-2 N308D function primarily to alter actin muscle development which ultimately leads to defects in cardiac morphogenesis.