BACKGROUND: Maternal diabetes during pregnancy is a well-known teratogen that increases the risk for birth defects, such as neural tube defects (NTDs). We have previously shown that maternal diabetes profoundly affects gene expression in the developing embryo, in particular a suite of known NTD genes. In rodent experimental systems, NTDs present as phenotypes of incomplete penetrance in diabetic pregnancies. This property is difficult to reconcile with observations of consistently altered gene expression in exposed embryos. We here show that maternal diabetes increases the overall variability of gene expression levels in embryos. RESULTS: Altered gene expression and increased variability of gene expression together may constitute the molecular correlates for incomplete phenotype penetrance. DISCUSSION: Based on this model, we suggest that maternal diabetes reduces the precision of gene regulation in exposed individuals. Loss of precision in embryonic gene regulation may include changes to the epigenome via deregulated expression of chromatin-modifying factors. Unraveling the mechanisms underlying such epigenetic modifications in diabetic pregnancies will help to understand how teratogenic insults compromise embryonic development and possibly provide avenues for therapeutic intervention. Birth Defects Research (Part A), 2010. © 2010 Wiley-Liss, Inc.