To investigate the roles of Pten and beta-Catenin in the midbrain, either the Pten gene or the beta-catenin gene was conditionally ablated, using Dmbx1 (diencephalon/mesencephalon-expressed brain homeobox gene 1)-Cre mice. Homozygous disruption of the Pten or beta-catenin gene in Dmbx1-expressing cells caused severe hydrocephalus and mortality during the postnatal period. Conditional deletion of Pten resulted in enlargement of midbrain structures. beta-catenin conditional mutant mice showed malformation of the superior and inferior colliculi and stenosis of the midbrain aqueduct. These results demonstrate that both Pten and beta-Catenin are essential for proper midbrain development, and provide the direct evidence that mutations of both Pten and beta-catenin lead to hydrocephalus.