Mouse embryos homozygous for the loop-tail (Lp) mutation fail to initiate neural tube closure at E8.5, leading to a severe malformation in which the neural tube remains open from midbrain to tail. During initiation of closure, the normal mouse neural plate bends sharply in the midline, at the site of the future floor plate. In contrast, Lp/Lp embryos exhibit a broad region of flat neural plate in the midline, displacing the sites of neuroepithelial bending to more lateral positions. Sonic hedgehog (Shh) and Netrin1 are expressed in abnormally broad domains in the ventral midline of the E9.5 Lp/Lp neural tube, suggesting over-abundant differentiation of the floor plate. The notochord is also abnormally broad in Lp/Lp embryos with enlarged domains of Shh and Brachyury expression. The paraxial mesoderm shows evidence of ventralisation, with increased expression of the sclerotomal marker Pax1, and diminished expression of the dermomyotomal marker Pax3. While the expression domain of Pax3 does not differ markedly from wild-type, there is a dorsal shift in the domain of Pax6 expression in the neural tube at caudal levels of Lp/Lp embryos. We suggest that the Lp mutation causes excessive differentiation of floor-plate and notochord, with over-production of Shh from these midline structures causing ventralisation of the paraxial mesoderm and, to a lesser extent, the neural tube. Comparison with other mouse mutants suggests that the enlarged floor plate may be responsible for the failure of neural tube closure in Lp/Lp embryos.