We have examined the role of the two closely related homeobox genes Gsh1 and Gsh2, in the development of the striatum and the olfactory bulb. These two genes are expressed in a partially overlapping pattern by ventricular zone progenitors of the ventral telencephalon. Gsh2 is expressed in both of the ganglionic eminences while Gsh1 is largely confined to the medial ganglionic eminence. Previous studies have shown that Gsh2(-/-) embryos suffer from an early misspecification of precursors in the lateral ganglionic eminence (LGE) leading to disruptions in striatal and olfactory bulb development. This molecular misspecification is present only in early precursor cells while at later stages the molecular identity of these cells appears to be normalized. Concomitant with this normalization, Gsh1 expression is notably expanded in the Gsh2(-/-) LGE. While no obvious defects in striatal or olfactory bulb development were detected in Gsh1(-/-) embryos, Gsh1/2 double homozygous mutants displayed more severe disruptions than were observed in the Gsh2 mutant alone. Accordingly, the molecular identity of LGE precursors in the double mutant is considerably more perturbed than in Gsh2 single mutants. These findings, therefore, demonstrate an important role for Gsh1 in the development of the striatum and olfactory bulb of Gsh2 mutant mice. In addition, our data indicate a role for Gsh genes in controlling the size of the LGE precursor pools, since decreasing copies of Gsh2 and Gsh1 alleles results in a notable decrease in precursor cell number, particularly in the subventricular zone.