Mf1, which encodes a winged-helix/forkhead transcription factor, is the murine homolog of human FKHL7, mutated in individuals with autosomal dominant inherited dysgenesis of the anterior segment of the eye (Axenfeld–Reiger anomaly). Mouse embryos homozygous for null mutations in Mf1 (Mf1^lacZ and Mf1^ch) show severely abnormal development of the anterior segment. The cornea fails to separate from the lens, resulting in the complete absence of an anterior chamber. There is no differentiation of the inner corneal endothelial layer, as judged by electron microscopy and by absence of labeling with monoclonal antibody to zonula occludens protein 1, a normal component of occluding junctions in wild-type endothelial cells. In addition, the mutant corneal stroma is disorganized and the epithelium thicker than normal. The Mf1 gene is normally expressed in the periocular mesenchyme at E11.5 but is downregulated as the corneal endothelium differentiates. In contrast, Mf1^lacZ expression persists longer in mutant corneal mesenchyme, and abnormal expression is also seen in the mutant corneal epithelium. Based on classical studies with the chick embryonic eye, a model is proposed for the differentiation of the mammalian corneal endothelium from mesenchyme in response to putative signals from the lens. Possible roles for Mf1 in this process are discussed.