Specialized NK cells are recruited in high numbers to the mammalian embryo implantation sites, yet remain pregnancy compatible. It is not well understood whether uterine NK (uNK) cells become adversely activated and mediate fetal demise, a common complication of early pregnancy. In this study we show that mating of IL-10(-/-) mice resulted in fetal resorption or intrauterine growth restriction in response to very low doses of LPS. Pregnancy in congenic wild-type mice was normal even at 10-fold higher LPS doses. Fetal resorption in IL-10(-/-) mice was associated with a significant increase in uNK cell cytotoxic activation and invasion into the placenta. Depletion of uNK cells, TNF-alpha neutralization, or IL-10 administration rescued pregnancy in LPS-treated IL-10(-/-) animals. Our results identify an immune mechanism of fetal demise involving IL-10 deficiency, NK cells, and inflammation. These results may provide insight into adverse pregnancy outcomes in humans.