In this study we investigate the molecular mechanisms that are responsible for the restricted expression of Wnt-1 during embryogenesis. We report that a single homeodomain binding site, HBS1, within the Wnt-1 enhancer contributes to appropriate spatial expression of Wnt-1 in the developing nervous system. This HBS1 site may be required for repressing Wnt-1 expression in the developing forebrain since specific mutations of this site result in an extension of the rostral boundary of Wnt-1/lacZ staining in transgenic embryos. We further demonstrate that a subset of homeodomain proteins expressed in the forebrain (i.e., Dix2, Emx2) interact specifically with HBS1. These findings suggest that these (or related) homeodomain proteins may regulate expression of Wnt-1 during normal brain development by interacting with the HBS1 site in the Wnt-1 enhancer.