In the developing vertebrate CNS, members of the Wnt gene family are characteristically expressed at signaling centers that pattern adjacent parts of the neural tube. To identify candidate signaling centers in the telencephalon, we isolated Wnt gene fragments from cDNA derived from embryonic mouse telencephalon. In situ hybridization experiments demonstrate that one of the isolated Wnt genes, Wnt7a, is broadly expressed in the embryonic telencephalon. By contrast, three others, Wnt3a, 5a and a novel mouse Wnt gene, Wnt2b, are expressed only at the medial edge of the telencephalon, defining the hem of the cerebral cortex. The Wnt-rich cortical hem is a transient, neuron-containing, neuroepithelial structure that forms a boundary between the hippocampus and the telencephalic choroid plexus epithelium (CPe) throughout their embryonic development. Indicating a close developmental relationship between the cortical hem and the CPe, Wnt gene expression is upregulated in the cortical hem both before and just as the CPe begins to form, and persists until birth. In addition, although the cortical hem does not show features of differentiated CPe, such as expression of transthyretin mRNA, the CPe and cortical hem are linked by shared expression of members of the Bmp and Msx gene families. In the extra-toesJ (XtJ) mouse mutant, telencephalic CPe fails to develop. We show that Wnt gene expression is deficient at the cortical hem in XtJ/XtJ mice, but that the expression of other telencephalic developmental control genes, including Wnt7a, is maintained. The XtJ mutant carries a deletion in Gli3, a vertebrate homolog of the Drosophila gene cubitus interruptus (ci), which encodes a transcriptional regulator of the Drosophila Wnt gene, wingless. Our observations indicate that Gli3 participates in Wnt gene regulation in the vertebrate telencephalon, and suggest that the loss of telencephalic choroid plexus in XtJ mice is due to defects in the cortical hem that include Wnt gene misregulation.