Prx1 and Prx2 are closely related paired-class homeobox genes that are expressed in very similar patterns predominantly in mesenchyme. Prx1 loss-of-function mutants show skeletal defects in skull, limbs and vertebral column (Martin, J. F., Bradley, A. and Olson, E. N. (1995) Genes Dev. 9, 1237-1249). We report here that mice in which Prx2 is inactivated by a lacZ insertion had no skeletal defects, whereas Prx1/Prx2 double mutants showed many novel abnormalities in addition to an aggravation of the Prx1 single mutant phenotype. We found defects in external, middle and inner ear, reduction or loss of skull bones, a reduced and sometimes cleft mandible, and limb abnormalities including postaxial polydactyly and bent zeugopods. A single, or no incisor was present in the lower jaw, and ectopic expression of Fgf8 and Pax9 was found medially in the mandibular arch. A novel method to detect &bgr ;-galactosidase activity in hydroxyethylmethacrylate sections allowed detailed analysis of Prx2 expression in affected structures. Our results suggest a role for Prx genes in mediating epitheliomesenchymal interactions in inner ear and lower jaw. In addition, Prx1 and Prx2 are involved in interactions between perichondrium and chondrocytes that regulate their proliferation or differentiation in the bones of the zeugopods.