We report the generation and analysis of mice homozygous for a targeted deletion of the Dlx5 homeobox gene. Dlx5 mutant mice have multiple defects in craniofacial structures, including their ears, noses, mandibles and calvaria, and die shortly after birth. A subset (28%) exhibit exencephaly. Ectodermal expression of Dlx5 is required for the development of olfactory and otic placode-derived epithelia and surrounding capsules. The nasal capsules are hypoplastic (e.g. lacking turbinates) and, in most cases, the right side is more severely affected than the left. Dorsal otic vesicle derivatives (e. g. semicircular canals and endolymphatic duct) and the surrounding capsule, are more severely affected than ventral (cochlear) structures. Dlx5 is also required in mandibular arch ectomesenchyme, as the proximal mandibular arch skeleton is dysmorphic. Dlx5 may control craniofacial development in part through the regulation of the goosecoid homeobox gene. goosecoid expression is greatly reduced in Dlx5 mutants, and both goosecoid and Dlx5 mutants share a number of similar craniofacial malformations. Dlx5 may perform a general role in skeletal differentiation, as exemplified by hypomineralization within the calvaria. The distinct focal defects within the branchial arches of the Dlx1, Dlx2 and Dlx5 mutants, along with the nested expression of their RNAs, support a model in which these genes have both redundant and unique functions in the regulation of regional patterning of the craniofacial ectomesenchyme.