AbstractPax6 encodes a highly conserved transcriptional regulator with two DNA‐binding motifs, a paired domain and a paired‐like homeodomain. Humans carrying PAX6 loss‐of‐function mutations suffer from abnormal development of the eyes (congenital aniridia) and brain. Small eye mice carrying Pax6 loss‐of‐function mutations provide a good model for these human conditions. Their analysis has demonstrated the critical importance of this transcription factor in multiple cell types and at several key stages of forebrain development. In the forebrain, Pax6 is critical for the establishment of the pallial–subpallial boundary, which separates dorsal (future cerebral cortex) and ventral (future striatum) telencephalic regions. Levels of Pax6 expression are critically important for cortical progenitor proliferation and its presence in a rostro‐lateralhigh to caudo‐mediallow gradient in the cortex is necessary to establish rostro‐lateral identities. Furthermore, axon guidance is disrupted in Pax6−/− mutants: the majority of thalamocortical axons fail to enter the ventral telencephalon and those that do are unable to innervate their cortical targets. The extent to which the effects of Pax6 later in development are secondary to its effects in early patterning and proliferation remains largely unknown. This is likely to be clarified by future studies on the molecular mechanisms of action of Pax6 and, in particular, the identification of its downstream target genes. Such studies should also help generate an increasingly coherent understanding of how this pleiotropic transcription factor becomes involved in so many facets of neural development. © 2011 Wiley Periodicals, Inc. Develop Neurobiol 71:690–709, 2011