Mouse mutants have allowed us to gain significant insight into axis development. However, much remains to be learned about the cellular and molecular basis of early forebrain patterning. We describe a lethal mutation mouse strain generated using promoter-trap mutagenesis. The mutants exhibit severe forebrain truncation in homozygous mouse embryos and various craniofacial defects in heterozygotes. We show that the defects are caused by disruption of the gene encoding cellular nucleic acid binding protein (CNBP); Cnbp transgenic mice were able to rescue fully the mutant phenotype. Cnbp is first expressed in the anterior visceral endoderm (AVE) and,subsequently, in the anterior definitive endoderm (ADE), anterior neuroectoderm (ANE), anterior mesendoderm (AME), headfolds and forebrain. In Cnbp -/- embryos, the visceral endoderm remains in the distal tip of the conceptus and the ADE fails to form, whereas the node and notochord form normally. A substantial reduction in cell proliferation was observed in the anterior regions of Cnbp -/- embryos at gastrulation and neural-fold stages. In these regions, Myc expression was absent, indicating CNBP targets Myc in rostral head formation. Our findings demonstrate that Cnbp is essential for the forebrain induction and specification.