Dilp1 is a semi-dominant mouse mutation that causes dilated pupils when heterozygous and is lethal when homozygous. We report here that it is caused by a point mutation that introduces a stop codon close to the start of the coding sequence of the paired-like homeobox transcription factor Phox2b. Mice carrying a targeted allele of Phox2b also have dilated pupils and the two alleles do not complement. Phox2b is necessary for the development of the autonomic nervous system and when absent one of the consequences is that all parasympathetic ganglia fail to form. Constriction of the pupil is a parasympathetic response mediated by the ciliary ganglion and we find that in Phox2b heterozygous mutants it is highly atrophic. The development of other parasympathetic and sympathetic ganglia appears to be largely unaffected indicating that the ciliary ganglion is exquisitely sensitive to a reduction in dose of this transcription factor. PHOX2B has been implicated in human disease. Mutations, principally leading to polyalanine expansions within the protein, have been found in patients with congenital central hypoventilation syndrome (CCHS), the cardinal feature of which is an inability to breathe unassisted when asleep. Additionally, some CCHS patients have ocular abnormalities, including pupillary defects, although they principally have constricted rather than dilated pupils. The apparent phenotypic differences observed between mice carrying a loss-of-function mutation of Phox2b and CCHS patients indicate that PHOX2B mutations found in CCHS patients, all of which can produce proteins with intact DNA-binding domains, are gain-of-function mutations that alter rather than abolish protein function.