Genetic control of mammalian head development involves mechanisms that are shared with trunk development as well as mechanisms that are independent. For example, mutations in the nodal gene disrupt axis formation and head development while mutations in the Otx2 or Lim1 genes block head development without disrupting development of the trunk. We show here that the oto mutation on mouse chromosome 1 defines a locus with a critical role in anterior development. The oto mutation disrupts development of the telencephalic and optic vesicles, the pharyngeal endoderm and the first branchial arch. Also, oto embryos have dose-dependent, posterior homeotic transformations throughout the axial skeleton. To further dissect the role of the oto locus in head development, we crossed mice carrying oto and Lim1 mutations. Interactions between the two mutations indicate that the role of oto in the regulation of head development is partially redundant with that of Lim1. The phenotype of oto embryos points to an early and critical role for oto in the development of forebrain subregions. Transformations of the vertebrae in oto embryos reveal a Lim1-independent role in the establishment of positional information in the trunk.