A concentration gradient of Shh is thought to pattern the ventral neural tube, and these ventral cell types are absent in shh-/- mice. Based on in vitro and genetic studies, the zinc finger-containing transcription factors Gli 1, 2, and 3 are mediators of the Shh intracellular response. The floorplate and adjacent cell types are absent in gli1-/-;gli2-/- mice, but part of the Shh-/- phenotype in the neural tube is alleviated in the Shh-/-;gli3-/- double mutant. This is consistent with the predicted role of Gli3 as a repressor of the Shh response. Gli3 repressor activity is blocked by Shh. In order to test the role of the repressor form of Gli3 in the neural tube, a truncated version of Gli3 (Gli3R*) was designed to mimic a Pallister Hall allele. Gli3R* acts as a constitutive repressor independent of Shh signaling. Misexpression of Gli3R* in the chick neural tube caused a ventral expansion of class-I, dorsal progenitor proteins and a loss of class-II, ventral progenitor proteins consistent with expected activity as a repressor of the Shh response. Activation of the BMP response is sufficient to maintain gli3 expression in neural plate explants, which might be a mechanism by which BMPs antagonize the Shh response.