Induction of the floor plate at the ventral midline of the neural tube is one of the earliest events in the establishment of dorsoventral (d/v) polarity in the vertebrate central nervous system (CNS). The secreted molecule, Sonic hedgehog, has been shown to be both necessary and sufficient for this induction. In vertebrates, several downstream components of this signalling pathway have been identified, including members of the Gli transcription factor family. In this study, we have examined d/v patterning of the CNS in Gli2 mouse mutants. We have found that the floor plate throughout the midbrain, hindbrain and spinal cord does not form in Gli2 homozygotes. Despite this, motoneurons and ventral interneurons form in their normal d/v positions at 9.5 to 12.5 days postcoitum (dpc). However, cells that are generated in the region flanking the floor plate, including dopaminergic and serotonergic neurons, were greatly reduced in number or absent in Gli2 homozygous embryos. These results suggest that early signals derived from the notochord can be sufficient for establishing the basic d/v domains of cell differentiation in the ventral spinal cord and hindbrain. Interestingly, the notochord in Gli2 mutants does not regress ventrally after 10.5 dpc, as in normal embryos. Finally, the spinal cord of Gli1/Gli2 zinc-finger-deletion double homozygous mutants appeared similar to Gli2 homozygotes, indicating that neither gene is required downstream of Shh for the early development of ventral cell fates outside the ventral midline.