Craniofacial development of vertebrates depends largely on neural crest contribution and each subdomain of the crest-derived ectomesenchyme follows its specific genetic control. The rat small eye (rSey) involves a mutation in the Pax-6 gene and the external feature of rSey homozygous embryos exhibits craniofacial defects in ocular and frontonasal regions. In order to identify the mechanism of craniofacial development, we examined the cranial morphology and migration of cephalic crest cells in rSey embryos. The chondrocranial defects of homozygous rSey embryos primarily consisted of spheno-orbital and ethmoidal anomalies. The former defects appeared to be brought about by the lack of the eye. In the ethmoid region, the nasal septum and the derivative of the medial nasal prominence were present, while the rest of the nasal capsule, as well as the nasal and lachrymal bones, were totally absent except for a pair of cartilaginous rods in place of the nasal capsule. This suggests that the primary cranial defect is restricted to the lateral nasal prominence derivatives. Dil labeling revealed the abnormal migration of crest cells specifically from the anterior midbrain to the lateral nasal prominence in homozygous rSey embryos. Pax-6 was not expressed in the crest cells but was strongly expressed in the frontonasal ectoderm. To determine whether or not this migratory defect actually resides in environmental cues, normal midbrain crest cells from wild-type embryos were labeled with Dil and were orthotopically injected into host rSey embryos. Migration of the donor crest cells into the lateral nasal prominence was abnormal in homozygous host embryos, while they migrated normally in wild-type or heterozygous embryos. Therefore, the cranial defects in rSey homozygous embryos are due to inappropriate substrate for crest cell migration towards the lateral nasal prominence, which consistently explains the cranial morphology of homozygous rSey embryos.