The homeobox genes of Drosophila perform key functions in embryonic pattern formation, and their vertebrate counterparts may play similar developmental roles. Using polymerase chain reaction technology, we have identified four murine homologs of the Drosophila Distal-less homeobox gene that are expressed in midgestation embryos. The homeodomains encoded by these genes vary considerably from other known homeodomain sequences and represent a new family of vertebrate homeobox genes. We isolated a cDNA for one of these genes (Dlx-2) and studied its expression by in situ hybridization from 8.5 days postcoitum (pc) until postnatal day 1. Dlx-2 shows a restricted pattern of expression in the ventral forebrain, extending from the olfactory bulb to the ventral diencephalon. This domain of expression may delineate an ontogenetically defined subdivision within the forebrain. The murine Distal-less genes are the first homeobox genes described whose expression in the central nervous system is exclusively restricted to the forebrain. Thus, the Distal-less genes may contribute missing positional cues not provided by the previously identified vertebrate homeobox genes.