In this study, we elucidate the roles of the winged-helix transcription factor Foxa2 in ventral CNS development in zebrafish. Through cloning of monorail (mol), which we find encodes the transcription factor Foxa2, and phenotypic analysis of mol(-/-) embryos, we show that floorplate is induced in the absence of Foxa2 function but fails to further differentiate. In mol(-/-) mutants, expression of Foxa and Hh family genes is not maintained in floorplate cells and lateral expansion of the floorplate fails to occur. Our results suggest that this is due to defects both in the regulation of Hh activity in medial floorplate cells as well as cell-autonomous requirements for Foxa2 in the prospective laterally positioned floorplate cells themselves. Foxa2 is also required for induction and/or patterning of several distinct cell types in the ventral CNS. Serotonergic neurones of the raphenucleus and the trochlear motor nucleus are absent in mol(-/-) embryos, and oculomotor and facial motoneurones ectopically occupy ventral CNS midline positions in the midbrain and hindbrain. There is also a severe reduction of prospective oligodendrocytes in the midbrain and hindbrain. Finally, in the absence of Foxa2, at least two likely Hh pathway target genes are ectopically expressed in more dorsal regions of the midbrain and hindbrain ventricular neuroepithelium, raising the possibility that Foxa2 activity may normally be required to limit the range of action of secreted Hh proteins.