Adenosine-to-inosine (A-to-I) editing is a highly prevalent posttranscriptional modification of RNA, mediated by ADAR (adenosine deaminase acting on RNA) enzymes. In addition to RNA editing, additional functions have been proposed for ADAR1. To determine the specific role of RNA editing by ADAR1, we generated mice with an editing-deficient knock-in mutation (Adar(1E861A), where E861A denotes Glu(861)-> Ala(861)). Adar1(E861A)/(E861A) embryos died at similar to E13.5 (embryonic day 13.5), with activated interferon and double-stranded RNA (dsRNA)-sensing pathways. Genome-wide analysis of the in vivo substrates of ADAR1 identified clustered hyperediting within long dsRNA stem loops within 3' untranslated regions of endogenous transcripts. Finally, embryonic death and phenotypes of Adar(1E861A/E861A) were rescued by concurrent deletion of the cytosolic sensor of dsRNA, MDA5. A-to-I editing of endogenous dsRNA is the essential function of ADAR1, preventing the activation of the cytosolic dsRNA response by endogenous transcripts.