The anterior part of the vertebrate head expresses a group of homeo box genes in segmentally restricted patterns during embryogenesis. Among these, Otx2 expression covers the entire fore- and midbrains and takes place earliest. To examine its role in development of the rostral head, a mutation was introduced into this locus. The homozygous mutants did not develop structures anterior to rhombomere 3, indicating an essential role of Otx2 in the formation of the rostral head. In contrast, heterozygous mutants displayed craniofacial malformations designated as otocephaly; affected structures appeared to correspond to the most posterior and most anterior domains of Otx expression where Otx1 is not expressed. The homo- and heterozygous mutant phenotypes suggest Otx2 functions as a gap-like gene in the rostral head where Hox code is not present. The evolutionary significance of Otx2 mutant phenotypes was discussed for the innovation of the neurocranium and the jaw.