The transcription factor Gli3 is expressed throughout developing telencephalon. Previous studies have focused on Gli3's role in dorsal telencephalon, which is greatly reduced in size in Gli3(Xt/Xt) mutants. We examined the effects of loss of Gli3 on early development of ventral telencephalon. Ventral telencephalon was defined in both wildtypes and Gli3(Xt/Xt) mutants on the basis of its expression of Olig2, Nkx2.1, Mash1, and Foxg1 and its lack of expression of Pax6. We found that at embryonic day (E)10.5 the volume of the ventral telencephalon is about 50% greater in Gli3(Xt/Xt) mutants than in wildtypes. By E12.5, however, the volume of the ventral telencephalon is about 20% lower in Gli3(Xt/Xt) mutants than in wildtypes. We observed a significant increase in the number of both apoptotic cells and newly differentiated neurons in the E10.5 Gli3(Xt/Xt) ventral telencephalon, suggesting that increased cell death and withdrawal of cells from the cell cycle might account for the failure of the Gli3(Xt/Xt) ventral telencephalon to grow normally by E12.5. We found no changes in the lengths of the cell cycles of proliferating ventral telencephalic cells at E10.5. We used marker analysis and optical projection tomography to assess the Gli3(Xt/Xt) forebrain in three dimensions and found that the Gli3(Xt/Xt) diencephalon is shifted relatively rostrally. We conclude that in the absence of Gli3 an abnormally large portion of the newly formed telencephalon is specified to a ventral fate but this then suffers impaired growth, due to defects of cell differentiation and death, contributing to severe distortion of the forebrain.