Mouse Otx2 is a bicoid-class homeobox gene, related to the Drosophila orthodenticle (otd) gene. Expression of this gene is initially widespread in the epiblast at embryonic day 5.5 but becomes progressively restricted to the anterior end of the embryo at the headfold stage. In flies, loss of function mutations in otd result in deletion of pre-antennal and antennal segments; which leads to the absence of head structures derived from these segments. To study the function of Otx2 in mice, we have generated a homeobox deletion mutation in this gene. Mice homozygous for this mutation show severe defects in gastrulation and in formation of axial mesoderm and loss of anterior neural tissues. These results demonstrate that Otx2 is required for proper development of the epiblast and patterning of the anterior brain in mice, and supports the idea of evolutionary conservation of the function of Otd/Otx genes in head development in flies and mice.