We describe the isolation and characterization of Pax‐3, a novel murine paired box gene expressed exclusively during embryogenesis. Pax‐3 encodes a 479 amino acid protein with an Mr of 56 kd containing both a paired domain and a paired‐type homeodomain. The Pax‐3 protein is a DNA binding protein that specifically recognizes the e5 sequence present upstream of the Drosophila even‐skipped gene. Pax‐3 transcripts are first detected in 8.5 day mouse embryos where they are restricted to the dorsal part of the neuroepithelium and to the adjacent segmented dermomyotome. During early neurogenesis, Pax‐3 expression is limited to mitotic cells in the ventricular zone of the developing spinal cord and to distinct regions in the hindbrain, midbrain and diencephalon. In 10–12 day embryos, expression of Pax‐3 is also seen in neural crest cells of the developing spinal ganglia, the craniofacial mesectoderm and in limb mesenchyme of 10 and 11 day embryos.