Otx1 and Otx2 genes are mouse cognates of a Drosophila head gap gene orthodenticle. The homozygous mutants have previously indicated that Otx2 is essential to development of structures anterior to rhombomere 3, probably reflecting its expression around the early primitive streak stage. Otx2 mutation also exhibits craniofacial defects by haplo-insufficiency. Affected structures correspond to the most anterior and most posterior parts of the Otx2 expression where Otx1 is not, or is only weakly, expressed at the time of brain regionalization. No apparent defects are found in early brain development by the Otx1 mutation, suggesting that the Otx1 and Otx2 functions overlap in the regions where both are expressed. To demonstrate this, the Otx1/Otx2 double heterozygous phenotype was examined in this study. Analyses with molecular markers at 9.5 days post coitus suggested the failure in development of mesencephalon and caudal diencephalon with the expansion of anterior metencephalon. Genes expressed in isthmus exhibited a characteristic lateral stripe normally, although rostrally shifted, except that Fgf8 expression was expanded dorsally. The defects were apparent at the 6-somite stage, but not at the 3-somite stage. Broad Fgf8 expression at the 3-somite stage took place normally, but it did not concentrate into a spot corresponding to future isthmus. The double heterozygous phenotype implicates a previously unsuspected mechanism for development of the mes/metencephalic territory; at the 3- to 6-somite stage Otx1 cooperates with Otx2 to establish the mes/diencephalic domain, allowing for the correct development of isthmus/ rhombomere 1.