We are interested in the early mechanisms that initiate regional patterning in the dorsal telencephalon, which gives rise to cerebral cortex. Members of the LIM-homeodomain (LIM-HD) family of transcription factors are implicated in patterning and cell fate specification in several systems including the mammalian forebrain. Mice in which Lhx2 is disrupted were reported to have reduced telencephalic development, and the hippocampal primordium appeared to be missing, by morphological observation. We hypothesized that this may be due to a defect in the cortical hem, a Wnt- and Bmp-rich putative signaling center in the medial telencephalon, a source of regulatory signals for hippocampal development. We asked if the expression of any known hem-specific signaling molecule is deficient in Lhx2-/- mice. Our results reveal, unexpectedly, that at embryonic day (E)12.5, what appears to be some spared 'lateral' cortex is instead an expanded cortical hem. Normally restricted to the extreme medial edge of the telencephalon, the hem covers almost the entire dorsal telencephalon in the Lhx2-/- mice. This indicates a role for Lhx2 in the regulation of the extent of the cortical hem. In spite of an expanded, mislocated hem in the Lhx2-/- telencephalon, a potential source of ectopic dorsalizing cues, no hippocampal differentiation is detected in tissue adjacent to the mutant hem, nor does the overall dorsoventral patterning appear perturbed. We propose that Lhx2 is involved at a crucial early step in patterning the telencephalon, where the neuroepithelium is first divided into presumptive cortical tissue, and the cortical hem. The defect in the Lhx2-/- telencephalon appears to be at this step.