Fibroblast growth factors (Fgfs) form a large family of secreted signalling proteins that have a wide variety of roles during embryonic development. Within the central nervous system (CNS) Fgf8 is implicated in patterning neural tissue adjacent to the midbrain-hindbrain boundary. However, the roles of Fgfs in CNS tissue rostral to the midbrain are less clear. Here we examine the patterning of the forebrain in zebrafish embryos that lack functional Fgf8/Ace. We find that Ace is required for the development of midline structures in the forebrain. In the absence of Ace activity, midline cells fail to adopt their normal morphology and exhibit altered patterns of gene expression. This disruption to midline tissue leads to severe commissural axon pathway defects, including misprojections from the eye to ectopic ipsilateral and contralateral targets. Ace is also required for the differentiation of the basal telencephalon and several populations of putative telencephalic neurons but not for overall regional patterning of forebrain derivatives. Finally, we show that ace expression co-localises with anterior neural plate cells that have previously been shown to have forebrain patterning activity. Removal of these cells leads to a failure in induction of ace expression indicating that loss of Ace activity may contribute to the phenotypes observed when anterior neural plate cells are ablated. However, as ace mutant neural plate cells still retain at least some inductive activity, then other signals must also be produced by the anterior margin of the neural plate.