Holoprosencephaly (HPE) is a remarkably common congenital anomaly characterized by failure to define the midline of the forebrain and midface. HPE is associated with heterozygous mutations in Sonic hedgehog (SHH) pathway components, but clinical presentation is extremely variable and many mutation carriers are unaffected. It has been proposed that these observations are best explained by a multiple-hit model, in which the penetrance and expressivity of an HPE mutation is enhanced by a second mutation or the presence of cooperating, but otherwise silent, modifier genes. Non-genetic risk factors are also implicated in HPE, and gene-environment interactions may provide an alternative multiple-hit model to purely genetic multiple-hit models; however, there is little evidence for this contention. We report here a mouse model in which there is dramatic synergy between mutation of a bona fide HPE gene (Cdon, which encodes a SHH co-receptor) and a suspected HPE teratogen, ethanol. Loss of Cdon and in utero ethanol exposure in 129S6 mice give little or no phenotype individually, but together produce defects in early midline patterning, inhibition of SHH signaling in the developing forebrain, and a broad spectrum of HPE phenotypes. Our findings argue that ethanol is indeed a risk factor for HPE, but genetically predisposed individuals, such as those with SHH pathway mutations, may be particularly susceptible. Furthermore, gene-environment interactions are likely to be important in the multifactorial etiology of HPE.