During development, the embryonic telencephalon is patterned into different areas that give rise to distinct adult brain structures. Several secreted signaling molecules are expressed at putative signaling centers in the early telencephalon. In particular, Fgf8 is expressed at the anterior end of the telencephalon and is hypothesized to pattern it along the anteroposterior (AP) axis. Using a CRE/loxP genetic approach to disrupt genes in the telencephalon, we address the role of FGF signaling directly in vivo by abolishing expression of the FGF receptor Fgfr1. In the Fgfr1-deficient telencephalon, AP patterning is largely normal. However, morphological defects are observed at the anterior end of the telencephalon. Most notably, the olfactory bulbs do not form normally. Examination of the proliferation state of anterior telencephalic cells supports a model for olfactory bulb formation in which an FGF-dependent decrease in proliferation is required for initial bulb evagination. Together the results demonstrate an essential role for Fgfr1 in patterning and morphogenesis of the telencephalon.