β-Catenin is a central component of both the cadherin- catenin cell adhesion complex and the Wnt signaling pathway. We have investigated the role of β-catenin during brain morphogenesis, by specifically inactivating the β- catenin gene in the region of Wnt1 expression. To achieve this, mice with a conditional (‘floxed’) allele of β-catenin with required exons flanked by loxP recombination sequences were intercrossed with transgenic mice that expressed Cre recombinase under control of Wnt1 regulatory sequences. β-catenin gene deletion resulted in dramatic brain malformation and failure of craniofacial development. Absence of part of the midbrain and all of the cerebellum is reminiscent of the conventional Wnt1 knockout (Wnt1^−/−), suggesting that Wnt1 acts through β- catenin in controlling midbrain-hindbrain development. The craniofacial phenotype, not observed in embryos that lack Wnt1, indicates a role for β-catenin in the fate of neural crest cells. Analysis of neural tube explants shows that β-catenin is efficiently deleted in migrating neural crest cell precursors. This, together with an increased apoptosis in cells migrating to the cranial ganglia and in areas of prechondrogenic condensations, suggests that removal of β-catenin affects neural crest cell survival and/or differentiation. Our results demonstrate the pivotal role of β-catenin in morphogenetic processes during brain and craniofacial development.