Normal pregnancy is supported by increased levels of progesterone (P4), which is secreted from ovarian luteal cells via enzymatic steps catalyzed by P450scc (CYP11A1) and HSD3B. The development and maintenance of corpora lutea during pregnancy, however, are less well understood. Here we used Cyp11a1 transgenic mice to delineate the steps of luteal cell differentiation during pregnancy. Cyp11a1 in a bacterial artificial chromosome was injected into mouse embryos to generate transgenic mice with transgene expression that recapitulated endogenous Cyp11a1 expression. Cyp11a1 transgenic females displayed reduced pregnancy rate, impaired implantation and placentation, and decreased litter size in utero, although they produced comparable numbers of blastocysts. The differentiation of transgenic luteal cells was delayed during early pregnancy as shown by the delayed activation of genes involved in steroidogenesis and cholesterol availability. Luteal cell mitochondria were elongated, and their numbers were reduced, with morphology and numbers similar to those observed in granulosa cells. Transgenic luteal cells accumulated lipid droplets and secreted less progesterone during early pregnancy. The progesterone level returned to normal on Gestation Day 9 but was not properly withdrawn at term, leading to delayed stillbirth. P4 supplementation rescued the implantation rates but not the ovarian defects. Thus, overexpression of Cyp11a1 disrupts normal development of the corpus luteum, leading to progesterone insufficiency during early pregnancy. Misregulation of the progesterone production in Cyp11a1 transgenic mice during pregnancy resulted in aberrant implantation, anomalous placentation, and delayed parturition.