The multienzyme complex prolyl 4-hydroxylase catalyzes the hydroxylation of proline residues and acts as a chaperone during collagen synthesis in multicellular organisms. The beta subunit of this complex is identical to protein disulfide isomerase (PDI). The free-living nematode Caenorhabditis elegans is encased in a collagenous exoskeleton and represents an excellent model for the study of collagen biosynthesis and extracellular matrix formation. In this study, we examined prolyl 4-hydroxylase alpha-subunit (PHY; EC 1.14.11.2)- and beta-subunit (PDI; EC 5.3.4.1)-encoding genes with respect to their role in collagen modification and formation of the C. elegans exoskeleton. We identified genes encoding two PHYs and a single associated PDI and showed that all three are expressed in collagen-synthesizing ectodermal cells at times of maximal collagen synthesis. Disruption of the pdi gene via RNA interference resulted in embryonic lethality. Similarly, the combined phy genes are required for embryonic development. Interference with phy-1 resulted in a morphologically dumpy phenotype, which we determined to be identical to the uncharacterized dpy-18 locus. Two dpy-18 mutant strains were shown to have null alleles for phy-1 and to have a reduced hydroxyproline content in their exoskeleton collagens. This study demonstrates in vivo that this enzyme complex plays a central role in extracellular matrix formation and is essential for normal metazoan development.