Tbx5 is involved in congenital heart disease, however, the mechanisms leading to organ malformation are greatly unknown. We hypothesized a model by which the Tbx5 binding protein Pdlim7 controls nuclear/cytoplasmic shuttling and function of the transcription factor. Using the zebrafish, we present in vivo significance for an essential role of Tbx5/Pdlim7 protein interaction in the regulation of cardiac formation. Knock-down of Pdlim7 results in a non-looped heart, strikingly reminiscent of the tbx5 heartstrings mutant phenotype. However, while misregulation of Pdlim7 and Tbx5 produce similar aberrant cardiac morphology, molecular and histological analysis uncovered that the Pdlim7 and Tbx5 cardiac phenotypes are due to opposite effects on valve development. Loss of Pdlim7 function causes no valve tissue to develop while lack of Tbx5 results in increased valve tissue. These opposing defects are evident before valve formation and are the result of distinct gene misregulation during specification of the atrio-ventricular (AV) boundary. We show that Pdlim7/Tbx5 interactions affect the expression of Tbx5 target genes nppa and tbx2b at the AV boundary, and their domains of misexpression directly correlate with the identified valve defects. These studies demonstrate that controlling the correct balance of Tbx5 activity is crucial for the specification of the AV boundary and valve formation.