SETD2 is the only enzyme responsible for transcription-coupled histone H3 lysine 36 trimethylation (H3K36me3). Mutations in SETD2 cause human diseases including cancer and developmental defects. In mice, Setd2 is essential for embryonic vascular remodeling. Given that many epigenetic modifiers have recently been found to possess noncatalytic functions, it is unknown whether the major function(s) of Setd2 is dependent on its catalytic activity or not. Here, we established a site-specific knockin mouse model harboring a cancer patient-derived catalytically dead Setd2 (Setd2-CD). We found that the essentiality of Setd2 in mouse development is dependent on its methyltransferase activity, as the Setd2^CD/CD and Setd2^−/− mice showed similar embryonic lethal phenotypes and largely comparable gene expression patterns. However, compared with Setd2^−/−, the Setd2^CD/CD mice showed less severe defects in allantois development, and single-cell RNA-seq analysis revealed differentially regulated allantois-specific 5′ Hoxa cluster genes in these two models. Collectively, this study clarifies the importance of Setd2 catalytic activity in mouse development and provides a new model for comparative study of previously unrecognized Setd2 functions.