One of the earliest events in the development of the central nervous system is the establishment of positional identity along the anteroposterior (A-P) axis of the neuroepithelium. In recent years, regulatory genes with regionally restricted expression in the neuroepithelium have been identified which are believed to specify its developmental fate. We have previously described Brain Factor-1 (BF-1), a winged helix (WH) transcription factor expressed in the telencephalic neuroepithelium (Tao and Lai, 1992) Neuron 8:957-966. Here we report the cloning of the mouse cDNA for a novel WH protein, BF-2. We show that BF-2 is a sequence-specific DNA binding protein with a binding specificity distinct from BF-1. Its expression in the CNS during embryogenesis is restricted to the rostral diencephalic neuroepithelium. The caudal boundary of BF-2 expression is at the zona limitans intrathalamica. Rostrally, the BF-2 expression domain is adjacent to that of BF-1. The expression domains of these two factors define a boundary within the developing forebrain neuroepithelium. The BF-1/BF-2 boundary also extends laterally to divide the optic stalk and the retina into nasal (anterior) and temporal (posterior) domains. These observations suggest that in addition to playing a role in the subdivision of the forebrain, these two WH factors may also function to establish positional information in the retinal neuroepithelium.