Some of the earliest axon pathways to form in the vertebrate forebrain are established as commissural and retinal axons cross the midline of the diencephalon and telencephalon. To better understand axon guidance in the forebrain, we characterized the zebrafish belladonna (bel) mutation, which disrupts commissural and retinal axon guidance in the forebrain. Using a positional cloning strategy, we determined that the bel locus encodes zebrafish Lhx2, a lim-homeodomain transcription factor expressed in the brain, eye and fin buds. We show that bel(Ihx2) function is required for patterning in the ventral forebrain and eye, and that loss of bel function leads to alterations in regulatory gene expression, perturbations in axon guidance factors, and the absence of an optic chiasm and forebrain commissures. Our analysis reveals new roles for Ihx2 in midline axon guidance, forebrain patterning and eye morphogenesis.