Studies on the mouse Splotch (Sp) mutation, a deletion in the transcription factor Pax-3, have revealed that Pax-3 is essential for normal development of the neural crest. We have investigated the defect in neural crest development using a Wnt-l::LacZ reporter construct to mark neural crest cells. Staining embryos for beta-galactosidase activity at different developmental stages revealed a severe reduction in the number of neural crest cells which emigrated from the neural tube at the vagal and rostral trunk levels. At the caudal thoracic, lumbar, and sacral levels there was a complete loss of neural crest cell emigration. In contrast to previous work in culture, we saw no evidence for any delay in the onset of neural crest cell migration at anterior levels. Pax-3 is expressed in the dorsal neural tube, where the neural crest cells originate, in migrating neural crest cells, and in somitic cells along the migratory pathway. Hence, it is not clear which aspect of the Pax-3 expression accounts for the observed phenotype. We addressed this problem by transplanting neural tissue between mouse and chick embryos. Our studies indicate that the defect in the Splotch mutation is not intrinsic to the neural crest cells themselves, but appears to reflect inappropriate cell interactions either within the neural tube or between the neural tube and the somite.