The Sox2 transcription factor is active in stem/progenitor cells throughout the developing vertebrate central nervous system. However, its conditional deletion at E12.5 in mouse causes few brain developmental problems, with the exception of the postnatal loss of the hippocampal radial glia stem cells and the dentate gyrus. We deleted Sox2 at E9.5 in the telencephalon, using a Bf1-Cre transgene. We observed embryonic brain defects that were particularly severe in the ventral, as opposed to the dorsal, telencephalon. Important tissue loss, including the medial ganglionic eminence (MGE), was detected at E12.5, causing the subsequent impairment of MGE-derived neurons. The defect was preceded by loss of expression of the essential ventral determinants Nkx2.1 and Shh, and accompanied by ventral spread of dorsal markers. This phenotype is reminiscent of that of mice mutant for the transcription factor Nkx2.1 or for the Shh receptor Smo. Nkx2.1 is known to mediate the initial activation of ventral telencephalic Shh expression. A partial rescue of the normal phenotype at E14.5 was obtained by administration of a Shh agonist. Experiments in Medaka fish indicate that expression of Nkx2.1 is regulated by Sox2 in this species also. We propose that Sox2 contributes to Nkx2.1 expression in early mouse development, thus participating in the region-specific activation of Shh, thereby mediating ventral telencephalic patterning induction.