Mutations in several classes of embryonically-expressed transcription factor genes are associated with behavioral disorders and epilepsies. However, there is little known about how such genetic and neurodevelopmental defects lead to brain dysfunction. Here we present the characterization of an epilepsy syndrome caused by the absence of the transcription factor SOX1 in mice. In vivo electroencephalographic recordings from SOX1 mutants established a correlation between behavioral changes and cortical output that was consistent with a seizure origin in the limbic forebrain. In vitro intracellular recordings from three major forebrain regions, neocortex, hippocampus and olfactory (piriform) cortex (OC) showed that only the OC exhibits abnormal enhanced synaptic excitability and spontaneous epileptiform discharges. Furthermore, the hyperexcitability of the OC neurons was present in mutants prior to the onset of seizures but was completely absent from both the hippocampus and neocortex of the same animals. The local inhibitory GABAergic neurotransmission remained normal in the OC of SOX1-deficient brains, but there was a severe developmental deficit of OC postsynaptic target neurons, mainly GABAergic projection neurons within the olfactory tubercle and the nucleus accumbens shell. Our data show that SOX1 is essential for ventral telencephalic development and suggest that the neurodevelopmental defect disrupts local neuronal circuits leading to epilepsy in the SOX1-deficient mice.