Conotruncal malformations are a major cause of congenital heart defects in newborn infants. Recently, genetic screens in humans and in mouse models have identified mutations in LRP2, a multi-ligand receptor, as a novel cause of a common arterial trunk, a severe form of outflow tract (OFT) defect. Yet, the underlying mechanism why the morphogen receptor LRP2 is essential for OFT development remained unexplained. Studying LRP2-deficient mouse models, we now show that LRP2 is expressed in the cardiac progenitor niche of the anterior second heart field (SHF) that contributes to the elongation of the OFT during separation into aorta and pulmonary trunk. Loss of LRP2 in mutant mice results in the depletion of a pool of sonic hedgehog-dependent progenitor cells in the anterior SHF due to premature differentiation into cardiomyocytes as they migrate into the OFT myocardium. Depletion of this cardiac progenitor cell pool results in aberrant shortening of the OFT, the likely cause of CAT formation in affected mice. Our findings identified the molecular mechanism whereby LRP2 controls the maintenance of progenitor cell fate in the anterior SHF essential for OFT separation, and why receptor dysfunction is a novel cause of conotruncal malformation.