LIM-homeodomain (Lhx) genes constitute a gene family that plays critical roles in the control of pattern formation and cell type specification. We have identified a chicken L3/Lhx8 gene, which was widely expressed in the craniofacial region. Whole-mount in situ hybridization showed that L3/Lhx8 mRNA was expressed from stage 15--31 HH in overlapping domains of the maxillary process. Frozen sections revealed these signals in the mesenchyme underneath the epithelium. To determine whether the expression of L3/Lhx8 in the maxillary primordia required signals from the overlying oral epithelium, maxillary processes of stage 23 HH chick embryos were transplanted into the limb bud, in which the mesenchyme was grown in the presence or absence of oral epithelium. The maxillary mesenchyme with epithelium showed significant levels of L3/Lhx8 gene expression. In contrast, no expression of L3/Lhx8 was detected in the epithelium-free mesenchyme. To further explore signaling molecule(s) responsible for Lhx induction, a bead, soaked in either Fgf-8b or TGF-beta3, was implanted into an epithelium-free mesenchymal graft. Both TGF-beta3 and Fgf-8b beads induced expressions of L3/Lhx8 in epithelium-free mesenchymal grafts. Our data suggest that the L3/Lhx8 gene contributes to epithelial mesenchymal interaction in facial morphogenesis and that Fgf-8b and TGF-beta3 were, at least in part, responsible for the Lhx expression in the maxillary process.