Normal patterning and morphogenesis of the complex skeletal structures of the skull requires an exquisite, reciprocal cross-talk between the embryonic cephalic epithelia and mesenchyme. The mesenchyme associated with the jaws and the optic and olfactory capsules is derived from a Hox-negative cranial neural crest (CNC) population that acts much as an equivalence group in its interactions with specific local cephalic epithelial signals. Craniofacial pattern and morphogenesis is therefore controlled in large part through the regulation of these local cephalic epithelial signals. Here, we demonstrate that Pax6 is essential to the formation and maturation of the complex cephalic ectodermal patterning centers that govern the development and morphogenesis of the upper jaws and associated nasal capsules. Previous examinations of the craniofacial skeletal defects associated with Pax6 mutations have suggested that they arise from an optic-associated blockage in the migration of a specific subpopulation of midbrain CNC to the lateral frontonasal processes. We have addressed an alternative explanation for the craniofacial skeletal defects. We show that in Pax6SeyN/SeyN mutants regional CNC is present by E9.25 while there is already specific disruption in the early ontogenetic elaboration of cephalic ectodermal expression, associated with the nascent lambdoidal junction, of secreted signaling factors (including Fgf8 and Bmp4) and transcription factors (including Six1 and Dlx5) essential for upper jaw and/or nasal capsular development. Pax6 therefore regulates craniofacial form, at stages when CNC has just arrived in the frontonasal region, through its control of surface cephalic ectodermal competence to form an essential craniofacial patterning center. genesis 49:307-325, 2011. © 2011 Wiley-Liss, Inc.