The temporally and spatially restricted expression of the mouse Engrailed (En) genes is essential for development of the midbrain and cerebellum. The regulation of En-2 expression was studied using in vitro protein-DNA binding assays and in vivo expression analysis in transgenic mice to gain insight into the genetic events that lead to regionalization of the developing brain. A minimum En-2 1.0 kb enhancer fragment was defined and found to contain multiple positive and negative regulatory elements that function in concert to establish the early embryonic mid-hindbrain expression. Furthermore, the mid-hindbrain regulatory sequences were shown to be structurally and functionally conserved in humans. The mouse paired-box-containing genes Pax-2, Pax-5 and Pax-8 show overlapping expression with the En genes in the developing brain. Significantly, two DNA-binding sites for Pax-2, Pax-5 and Pax-8 proteins were identified in the 1.0 kb En-2 regulatory sequences, and mutation of the binding sites disrupted initiation and maintenance of expression in transgenic mice. These results present strong molecular evidence that the Pax genes are direct upstream regulators of En-2 in the genetic cascade controlling mid-hindbrain development. These mouse studies, taken together with others in Drosophila and zebrafish on the role of Pax genes in controlling expression of En family members, indicate that a Pax-En genetic pathway has been conserved during evolution.