The transcription factor Pax6 plays a key role during development of various organs, including the brain where it affects cell fate, cell proliferation and patterning. To understand how Pax6 coordinates these diverse effects at the molecular level, we examined the role of distinct DNA-binding domains of Pax6, the homeodomain (HD), the paired domain (PD) and its splice variant (5a), using loss- and gain-of-function approaches. Here we show that the PD is necessary for the regulation of neurogenesis, cell proliferation and patterning effects of Pax6, since these aspects are severely affected in the developing forebrain of the Pax6Aey18 mice with a deletion in the PD but intact homeo- and transactivation domains. In contrast, a mutation of the HD lacking DNA-binding (Pax64Neu) resulted in only subtle defects of forebrain development. We further demonstrate distinct roles of the two splice variants of the PD. Retrovirally mediated overexpression of Pax6 containing exon 5a inhibited cell proliferation without affecting cell fate, while Pax6 containing the canonical form of the PD lacking exon 5a affected simultaneously cell fate and proliferation. These results therefore demonstrate a key role of the PD in brain development and implicate splicing as a pivotal factor regulating the potent neurogenic role of Pax6.