One of the earliest organizational decisions in the development of the vertebrate brain is the division of the neural plate into Otx2-positive anterior and Gbx2-positive posterior territories. At the junction of these two expression domains, a local signaling center is formed, known as the midbrain-hindbrain boundary (MHB). This tissue coordinates or "organizes" the development of neighboring brain structures, such as the midbrain and cerebellum. Correct positioning of the MHB is thought to depend on mutual repression involving these two homeobox genes. Using a cell culture colocalization assay and coimmunoprecipitation experiments, we show that engrailed homology region 1 (eh1)-like motifs of both transcription factors physically interact with the WD40 domain of Groucho/Tle corepressor proteins. In addition, heat shock-induced expression of wild-type and mutant Otx2 and Gbx2 in medaka embryos demonstrates that Groucho is required for the repression of Otx2 by Gbx2. On the other hand, the repressive functions of Otx2 on Gbx2 do not appear to be dependent on corepressor interaction. Interestingly, the association of Groucho with Otx2 is also required for the repression of Fgf8 in the MHB. Therefore Groucho/Tle family members appear to regulate key aspects in the MHB development of the vertebrate brain.