Human mutations in Nkx2-5 lead to progressive cardiomyopathy and conduction defects via unknown mechanisms. To define these pathways, we generated mice with a ventricular-restricted knockout of Nkx2-5, which display no structural defects but have progressive complete heart block, and massive trabecular muscle overgrowth found in some patients with Nkx2-5 mutations. At birth, mutant mice display a hypoplastic atrioventricular (AV) node and then develop selective dropout of these conduction cells. Transcriptional profiling uncovered the aberrant expression of a unique panel of atrial and conduction system-restricted target genes, as well as the ectopic, high level BMP-10 expression in the adult ventricular myocardium. Further, BMP-10 is shown to be necessary and sufficient for a major component of the ventricular muscle defects. Accordingly, loss of ventricular muscle cell lineage specification into trabecular and conduction system myocytes is a new mechanistic pathway for progressive cardiomyopathy and conduction defects in congenital heart disease.