Small eye (Sey) mice homozygous for mutations in the Pax-6 gene have no lenses and no nasal cavities. We have examined the ontogeny of eye and nasal defects in Sey/Sey embryos and have related the defects seen to the pattern of Pax-6 mRNA expression in the mouse during normal eye and nasal development. There are two principal components of the early eye, the neural ectoderm of the optic vesicle, which forms the retina, and the overlying surface ectoderm, which forms the lens and cornea. By studying these interacting tissues in normal and Sey/Sey embryos, we have identified processes for which Pax-6 is important and can thus suggest possible roles for the Pax-6 gene. Pax-6 is essential for the formation of lens placodes from surface ectoderm. In normal development, early Pax-6 mRNA expression in a broad domain of surface ectoderm is downregulated, but expression is specifically maintained in the developing lens placode. Moreover, other Pax-6-expressing tissues are frequently those that have can transdifferentiate into lens. Thus, phenotype and expression together suggest a role for Pax-6 in lens determination. At least some functions of Pax-6 can be separated from the influence of other tissues. Early Sey/Sey optic vesicles are abnormally broad and fail to constrict proximally. These defects occur prior to the time of lens placode formation and probably reflect a requirement for Pax-6 in neural ectoderm. In surface ectoderm domains, where Pax-6 expression is known to be independent of the presence of an optic vesicle, Pax-6 function is required for the maintenance of its own transcription. The mutual dependency of lens and optic vesicle development can also be studied using the Small eye mutation. Using region-specific markers we find that, in the morphologically abnormal Sey/Sey optic vesicles, aspects of normal proximo-distal specification nevertheless persist, despite the complete absence of lens. Like the lens, the nasal cavities develop from ectodermal placodes that normally express Pax-6 mRNA, fail to form in Sey/Sey mice and show Pax-6-dependent Pax-6 mRNA regulation. Analysis of patterns of programmed cell death and absence of nasal region expression from an Msx-1 transgene in Sey/Sey embryos suggest a requirement for Pax-6 in the transition from presumptive nasal ectoderm to placode, and that Msx-1, or genes regulating it, are possible targets for Pax-6.