Steroids comprise a group of hormones that are, in the traditional view, secreted by the adrenal cortex, testes and ovaries, as well as the placenta during pregnancy and that reach their target organs via blood circulation. However, the concentration of available ligand for nuclear receptor binding is also regulated by target tissue metabolism. Hydroxysteroid (17beta) dehydrogenases (HSD17Bs) are a group of enzymes involved in this intracrine regulation of sex steroids. Among the HSD17Bs, HSD17B1 is an enzyme that catalyzes the reduction of estrone to estradiol and the reduction of androstenedione to testosterone. To elucidate the physiological function of HSD17B1, we generated a knockout mouse model with a disrupted Hsd17b1 gene, in which the entire coding region of Hsd17b1 was replaced with a LacZ/Neo insertion. Pubertal onset and estrous cycle were found to be normal in the homozygous Hsd17b1-LacZ/Neo females. However, the mice were subfertile and had defects in pregnancy maintenance, likely affected by an imbalance in ovarian steroid synthesis. In addition, the Hsd17b1-LacZ/Neo males presented with reduced fat mass, increased lean mass, and fatty liver, and the mice had an improved tolerance to high-fat diet-induced obesity. Surprisingly, the deletion of the Hsd17b1 gene disrupted the expression of an upstream neighboring gene, N-acetyl-alpha-glucosaminidase (Naglu). Furthermore, biochemically and morphologically similar metabolic phenotypes were observed in the Naglu knockout mice, while their fertility was normal. This observation together with observations from other analyses, indicated that the metabolic dysfunctions in the Hsd17b1-LacZ/Neo males were related to the downregulation of Naglu expression and not to the inhibition of HSD17B1 activity. In summary, this study elucidates the importance of HSD17B1 enzyme in female fertility and provides an example of how the altered genomic structure can affect the functions of neighboring genes, leading to severe off-target effects.