Although insights have emerged regarding genes controlling the early stages of eye formation, little is known about lens-fibre differentiation and elongation. The expression pattern of the Prox1 homeobox gene suggests it has a role in a variety of embryonic tissues, including lens 1. To analyse the requirement for Prox1 during mammalian development, we inactivated the locus in mice. Homozygous Prox1-null mice die at mid-gestation from multiple developmental defects; here we describe the specific effect on lens development. Prox1 inactivation causes abnormal cellular proliferation, downregulated expression of the cell-cycle inhibitors Cdkn1b (also known as p27 KIP1) and Cdkn1c (also known as p57 KIP2), misexpression of E-cadherin and inappropriate apoptosis. Consequently, mutant lens cells fail to polarize and elongate properly, resulting in a hollow lens. Our data provide evidence that the progression of terminal fibre differentiation and elongation is dependent on Prox1 activity during lens development.