The mouse microphthalmia (Mitf) gene encodes a basic-helix-loop-helix-zipper transcription factor whose mutations are associated with abnormalities in neuroepithelial and neural crest-derived melanocytes. In wild type embryos, Mitf expression in neuropithelium and neural crest precedes that of the melanoblast marker Dct, is then co-expressed with Dct, and gradually fades away except in cells in hair follicles. In embryos with severe Mitf mutations, neural crest-derived Mitf-expressing cells are rare, lack Dct expression, and soon become undetectable. In contrast, the neuroepithelial-derived Mitf-expressing cells of the retinal pigment layer are retained, express Dct, but not the melanogenic enzyme genes tyrosinase and Tyrp1, and remain unpigmented. The results show that melanocyte development critically depends on functional Mitf and that Mitf mutations affect the neural crest and the neuroepithelium in different ways.