Autotaxin (ATX) is a lysophospholipid-generating exoenzyme expressed in embryonic and adult neural tissues. We previously showed that ATX is expressed in the neural organizing centers, anterior head process, and midbrain-hindbrain boundary (MHB). To elucidate the role of ATX during neural development, here we examined the neural phenotypes of ATX-deficient mice. Expression analysis of neural marker genes revealed that lateral expansion of the rostral forebrain is reduced and establishment of the MHB is compromised as early as the late headfold stage in ATX mutant embryos. Moreover, ATX mutant embryos fail to complete cranial neural tube closure. These results indicate that ATX is essential for cranial neurulation and MHB establishment. Developmental Dynamics 240:413–421, 2011. © 2011 Wiley-Liss, Inc.