Gbx2 is a homeobox gene that plays a crucial role in positioning the mid/hindbrain organizer (isthmus), which regulates midbrain and cerebellar development primarily through the secreted factor FGF8. In Gbx2 null homozygotes, rhombomeres (r) 1-3 fail to develop and the isthmic expression of Fgf8 is reduced and disorganized. These mutants fail to form a cerebellum, as it is derived from r1. Here, we analyze mice homozygous for a Gbx2 hypomorphic allele (Gbx2(neo)). Quantitative RT-PCR and RNA in situ analyses indicate that the presence of a neo-resistance cassette impairs normal Gbx2 splicing thus reducing wild-type Gbx2 mRNA levels to 6-10% of normal levels in all domains and stages examined. In Gbx2 hypomorphic mutants, gene marker and neuronal patterning analyses indicate that reduced Gbx2 expression is sufficient to support the development of r3 but not r2. The posterior region of r1, from which the lateral cerebellum develops, is unaffected in these mutants. However, the anterior region of r1 is converted to an isthmus-like tissue. Hence, instead of expressing r1 markers, this region displays robust expression of Fgf8 and Fgf17, as well as the downstream FGF targets Spry1 and Spry4. Additionally, we demonstrate that the cell division regulator cyclin D2 is downregulated, and that cellular proliferation is reduced in both the normal isthmus and in the mutant anterior r1. As a result of this transformation, the cerebellar midline fails to form. Thus, our studies demonstrate different threshold requirements for the level of Gbx2 gene product in different regions of the hindbrain.