Pattern formation of the dorsal telencephalon is governed by a regionalisation process that leads to the formation of distinct domains, including the future hippocampus and neocortex. Recent studies have implicated signalling proteins of the Wnt and Bmp gene families as well as several transcription factors, including Gli3 and the Emx homeobox genes, in the molecular control of this process. The regulatory relationships between these genes, however, remain largely unknown. We have used transgenic analysis to investigate the upstream mechanisms for regulation of Emx2 in the dorsal telencephalon. We have identified an enhancer from the mouse Emx2 gene that drives specific expression of a lacZ reporter gene in the dorsal telencephalon. This element contains binding sites for Tcf and Smad proteins, transcriptional mediators of the Wnt and Bmp signalling pathway, respectively. Mutations of these binding sites abolish telencephalic enhancer activity, while ectopic expression of these signalling pathways leads to ectopic activation of the enhancer. These results establish Emx2 as a direct transcriptional target of Wnt and Bmp signalling and provide insights into a genetic hierarchy involving Gli3, Emx2 and Bmp and Wnt genes in the control of dorsal telencephalic development.