Homeobox gene transcription factors direct multiple functions during development. They are involved in early patterning of the embryo as well as cell specification, cell differentiation, and organogenesis. Here we describe a previously uncharacterized murine homeobox gene, Sax2, that shows high similarity to the Drosophila S59/slouch and murine Sax1 genes. We show that Sax2 gene expression occurs early during embryogenesis in the midbrain, the midbrain-hindbrain boundary, the ventral neural tube, the developing eye, and the apical ectodermal ridge of the limb. To determine the role of Sax2 during development, we generated a knockout mouse line by replacing part of the Sax2 coding sequences with the lacZ gene. The Sax2 null allele mutants exhibit a strong phenotype indicated by growth retardation starting immediately after birth and leading to premature death within the first 3 weeks postnatal. Intriguingly, our studies also demonstrated a striking autoregulation of the Sax2 gene in both positive- and negative-feedback mechanisms depending on the specific cell type expressing Sax2.