Cells at the anterior boundary of the neural plate (ANB) can induce telencephalic gene expression when transplanted to more posterior regions. Here, we identify a secreted Frizzled-related Wnt antagonist, Tlc, that is expressed in ANB cells and can cell nonautonomously promote telencephalic gene expression in a concentration-dependent manner. Moreover, abrogation of Tlc function compromises telencephalic development. We also identify Wnt8b as a locally acting modulator of regional fate in the anterior neural plate and a likely target for antagonism by Tlc. Finally, we show that tlc expression is regulated by signals that establish early antero-posterior and dorso-ventral ectodermal pattern. From these studies, we propose that local antagonism of Wnt activity within the anterior ectoderm is required to establish the telencephalon.