Craniofacial development is a complex multi-step process leading to the morphogenesis of the face and sense organs, and to that of the neck, including the anteriormost part of the respiratory and digestive apparatus and associated endocrine glands. In vertebrates, the process is initiated by the formation of the pharyngeal arches from ectoderm, endoderm and mesoderm. These arches are then populated by neural crest cells, which originate from the central nervous system. We show here that, in mouse, there is a requirement for the HMG box factor SOX3 during the earliest stage of pharyngeal development: the formation of the pharyngeal pouches that segment the pharyngeal region by individualising each arch. In Sox3-null mutants, these pouches are expanded at the detriment of the second pharyngeal arch. As a consequence, neural crest cell migration and ectoderm-derived epibranchial placode development are affected, leading to craniofacial defects. We also show that Sox3 genetically interacts both with FgfR1 and with Sox2, another member of the Soxb1 family, to fulfil its function in the pharyngeal region. Although the importance of the neural crest has long been recognised, our studies highlight the equally crucial role of the pharyngeal region in craniofacial morphogenesis. They also give insight into the formation of pharyngeal pouches, of which little is known in vertebrates. Finally, this work introduces two new players in craniofacial development - SOX3 and SOX2.