Here we report the isolation of a novel forkhead gene, Foxe3, that plays an important role in lens formation. During development Foxe3 is expressed in all undifferentiated lens tissues, and is turned off upon fiber cell differentiation. Foxe3 maps to a chromosomal region containing the dysgenetic lens (dyl) mutation. Mice homozygous for dyl display several defects in lens development. dyl mice also show altered patterns of crystallin expression suggesting a dysregulation of lens differentiation. We have identified mutations in Foxe3 that cosegregate with the dyl phenotype and are a likely cause of the mutant phenotype. Head ectoderm expression of Foxe3 is absent in Rx-/- and Small eye embryos indicating that Rx and Pax6 activity are necessary for Foxe3 expression.