Local expression of FGF8 at the mid/hindbrain boundary (MHB) governs the de
velopment of multiple neurons and support cells. Here we show that the pair
ed-domain protein Pax2 is necessary and sufficient for the induction of FGF
8 in part by regulating the expression of Pax5&8. A network of transcriptio
n and secreted factors, including En1, Otx2, Gbx2, Grg4 and Wnt1&4, that is
established independently of Pax2, further refines the expression domain a
nd level of FGF8 at the MHB through opposing effects on Pax2 activity. Our
results indicate that the expression of local organizing factors is control
led by combinatorial interaction between inductive and modulatory factors.