The gene orthodenticle homologue 2 (Otx2) encodes a paired-type homeodomain transcription factor that is known to play a role in head morphogenesis. In the mouse, Otx2 is expressed in the anterior neurectoderm, where it is required for the differentiation of anterior neural tissues. Otx2 is also expressed in the anterior mesendoderm (AME) but its role here is unknown. On p. 3859, Patrick Tam and co-workers investigate the role of Otx2 in the AME. Using Otx2 AME conditional knockout embryos, the researchers show that Otx2 activity in the AME is essential for head formation. They further demonstrate that the expression of Dkk1 and Lhx1, which are known regulators of head formation, is impaired in the AME of the Otx2 conditional knockout embryos. Dkk1 is a direct target of Otx2, and the researchers further identify regulatory regions in the Lhx1 locus to which Otx2 can bind, suggesting that Lhx1 is also likely to be a direct target of Otx2. Finally, the analysis of AME-specific Otx2;Lhx1 and Otx2;Dkk1 compound mutant embryos reveals that Otx2 acts synergistically with Lhx1 and Dkk1 in the AME during head formation. In summary, these findings uncover a crucial role for Otx2 during head and forebrain development.