We describe the isolation and characterization of Pax-3, a novel murine paired box gene expressed exclusively during embryogenesis. Pax-3 encodes a 479 amino acid protein with an Mr of 56 kd containing both a paired domain and a paired-type homeodomain. The Pax-3 protein is a DNA binding protein that specifically recognizes the e5 sequence present upstream of the Drosophila even-skipped gene. Pax-3 transcripts are first detected in 8.5 day mouse embryos where they are restricted to the dorsal part of the neuroepithelium and to the adjacent segmented dermomyotome. During early neurogenesis, Pax-3 expression is limited to mitotic cells in the ventricular zone of the developing spinal cord and to distinct regions in the hindbrain, midbrain and diencephalon. In 10-12 day embryos, expression of Pax-3 is also seen in neural crest cells of the developing spinal ganglia, the craniofacial mesectoderm and in limb mesenchyme of 10 and 11 day embryos.