The transcription factor gene HNF-3 beta is expressed in the ventral midline of the mouse embryonic neural tube, including the floor plate, a structure important for dorsoventral patterning and axonal guidance. To assess HNF-3 beta function, the gene has been ectopically expressed in the midbrain/hindbrain of transgenic embryos using an En-2 promoter/enhancer. By 18.5 days postcoitum, transgenic brains show a range of abnormalities, including absent inferior colliculus and reduced cerebellum. Earlier, several genes normally expressed in the floor plate (BMP-1, Steel factor, and HNF-3 alpha) are induced within the same ectopic dorsal domain as HNF-3 beta, and autoactivation of the endogenous HNF-3 beta is observed. Conversely, expression of the dorsal gene Pax-3 is suppressed. Ectopic dorsal neuronal differentiation and abnormal dorsal axonal projections are also seen. These results suggest that HNF-3 beta is an important regulator of floor plate development in vivo.