Goblet cell numbers decrease within the conjunctival epithelium in drying and cicatrizing ocular surface diseases. Factors regulating goblet cell differentiation in conjunctival epithelium are unknown. Recent data indicate that the transcription factor SAM-pointed domain epithelial-specific transcription factor (Spdef) is essential for goblet cell differentiation in tracheobronchial and gastrointestinal epithelium of mice. Using Spdef(-/-) mice, we determined that Spdef is required for conjunctival goblet cell differentiation and that Spdef(-/-) mice, which lack conjunctival goblet cells, have significantly increased corneal surface fluorescein staining and tear volume, a phenotype consistent with dry eye. Microarray analysis of conjunctival epithelium in Spdef(-/-) mice revealed down-regulation of goblet cell-specific genes (Muc5ac, Tff1, Gcnt3). Up-regulated genes included epithelial cell differentiation/keratinization genes (Sprr2h, Tgm1) and proinflammatory genes (Il1-alpha, Il-1beta, Tnf-alpha), all of which are up-regulated in dry eye. Interestingly, four Wnt pathway genes were down-regulated. SPDEF expression was significantly decreased in the conjunctival epithelium of Sjogren syndrome patients with dry eye and decreased goblet cell mucin expression. These data demonstrate that Spdef is required for conjunctival goblet cell differentiation and down-regulation of SPDEF may play a role in human dry eye with goblet cell loss. Spdef(-/-) mice have an ocular surface phenotype similar to that in moderate dry eye, providing a new, more convenient model for the disease.