The aim of this study was to examine the direct effect of lactation on the ability of the reproductive tract of postpartum dairy cows to support early embryo development. Twenty-one primiparous Holstein heifers were used. Immediately after calving, half of the cows were dried off (i.e., never milked), and the other half entered the milking herd and were milked twice daily. Jugular blood samples were taken twice per week from 15 d before calving to approximately 100 d postpartum to measure nonesterified fatty acids, β-hydroxybutyrate, glucose, insulin, and insulin-like growth factor-I. At the same time, body weight and body condition score were recorded for each cow. At approximately 60 d postpartum (experiment 1), approximately 65 two- to four-cell embryos, produced by in vitro maturation and fertilization, were endoscopically transferred to the oviduct ipsilateral to the corpus luteum of all cows on d 2 of the estrous cycle. Five days later (d 7), the oviduct and uterus were flushed nonsurgically and the number of embryos developing to the blastocyst stage was recorded. At approximately 90 d postpartum (experiment 2), the estrous cycles of the same cows were resynchronized and 15 to 20 in vitro-produced blastocysts were transferred to the uterus of each recipient on d 7. All cows were slaughtered on d 14 to assess embryo survival and dimensions. Body weight and body condition score were significantly different between groups for the entire postpartum period of the study. Concentrations of nonesterified fatty acids and β-hydroxybutyrate were higher and concentrations of glucose, insulin, and insulin-like growth factor-I were lower in lactating compared with nonlactating cows. Embryo recovery rates from lactating and dry cows were similar. In experiment 1, fewer embryos developed to the blastocyst stage in the lactating cows compared with the nonlactating cows. In experiment 2, embryo survival and conceptus dimensions were not different between lactating and nonlactating cows. In conclusion, the data indicate that the reproductive tract of the lactating dairy cow is compromised in its ability to support early embryo development compared with that of matched dry cows and this may contribute to early embryo mortality observed in such animals.