During development of the mammalian embryo, there is a complex relation between formation of the mesoderm and the neuroectoderm. In mouse, for example, the role of the node and its mesendoderm derivatives in anterior neural specification is still debated. Mouse Cripto(-/-) embryos could potentially help settle this debate because they lack almost all embryonic endoderm and mesoderm, including the node and its derivatives. In the present paper, we show that Cripto(-/-) embryos can still form functional neural stem cells that are able to differentiate and maintain a neural phenotype both in vivo and in vitro. These data suggest that signals emanating from the mesoderm and endoderm might not be essential for the formation and differentiation of neural stem cells. However, we use grafting experiments to show that the Cripto(-/-) isthmus (the secondary organizer located at the midbrain-hindbrain boundary) loses its inductive ability. We further show that the Cripto(-/-)isthmus expresses lower amounts of the isthmic signalling molecule, Fgf8. Since nearby tissues remain competent to respond to exogenously added Fgf8, this reduction in Fgf8 levels in the Cripto(-/-) isthmus is the potential cause of the loss of patterning ability in graft experiments. Overall, we interpret our data to suggest that the mammalian node and primitive streak are essential for the development of the regional identities that control the specification and formation of the secondary organizers within the developing brain.