The nested expression patterns of the paired-box containing transcription factors Pax2/5 and Pax6 demarcate the midbrain and forebrain primordium at the neural plate stage. We demonstrate that, in Pax2/5 deficient mice, the mesencephalon/metencephalon primordium is completely missing, resulting in a fusion of the forebrain to the hindbrain. Morphologically, in the alar plate the deletion is characterized by the substitution of the tectum (dorsal midbrain) and cerebellum (dorsal metencephalon) by the caudal diencephalon and in the basal plate by the replacement of the midbrain tegmentum by the ventral metencephalon (pons). Molecularly, the loss of the tectum is demonstrated by an expanded expression of Pax6, (the molecular determinant of posterior commissure), and a rostral shift of the territory of expression of Gbx2 and Otp (markers for the pons), towards the caudal diencephalon. Our results suggest that an intact territory of expression of Pax2/5 in the neural plate, nested between the rostral and caudal territories of expression of Pax6, is necessary for defining the midbrain vesicle.