The molecular basis of the mouse mutation splotch (Sp), which is associated with spina bifida and exencephaly, was analyzed at three of its alleles, Sp, Sp2H, and Spr. We mapped the paired box gene Pax-3 within the Inha to Akp3 interval, near or at the Sp locus on chromosome 1, and found Pax-3 to be deleted in heterozygous Spr/+ mice. Analysis of genomic DNA and cDNA clones constructed from Sp2H/Sp2H embryos identified a deletion of 32 nucleotides in the Pax-3 mRNA transcript and gene. This deletion maps within the paired homeodomain of PAX-3 and is predicted to create a truncated protein as a result of a newly created termination codon at the deletion breakpoint. Our study provides evidence for a causal link between deletion of the paired homeodomain of Pax-3 and the Sp2H mutation, and infers that Pax-3 plays a key role in normal neural development.