Cranial neural tube defects (NTDs) occur in mice carrying mutant alleles of many different genes, whereas isolated spinal NTDs (spina bifida) occur in fewer models, despite being common human birth defects. Spina bifida occurs at high frequency in the Axial defects (Axd) mouse mutant but the causative gene is not known. In the current study, the Axd mutation was mapped by linkage analysis. Within the critical genomic region, sequencing did not reveal a coding mutation whereas expression analysis demonstrated significant up-regulation of grainyhead-like 2 (Grhl2) in Axd mutant embryos. Expression of other candidate genes did not differ between genotypes. In order to test the hypothesis that over-expression of Grhl2 causes Axd NTDs, we performed a genetic cross to reduce Grhl2 function in Axd heterozygotes. Grhl2 loss of function mutant mice were generated and displayed both cranial and spinal NTDs. Compound heterozygotes carrying both loss (Grhl2 null) and putative gain of function (Axd) alleles exhibited normalization of spinal neural tube closure compared with Axd/+ littermates, which exhibit delayed closure. Grhl2 is expressed in the surface ectoderm and hindgut endoderm in the spinal region, overlapping with grainyhead-like 3 (Grhl3). Axd mutants display delayed eyelid closure, as reported in Grhl3 null embryos. Moreover, Axd mutant embryos exhibited increased ventral curvature of the spinal region and reduced proliferation in the hindgut, reminiscent of curly tail embryos, which carry a hypomorphic allele of Grhl3. Overall, our data suggest that defects in Axd mutant embryos result from over-expression of Grhl2.