Although most genes share their chromosomal neighbourhood with other genes, distribution of genes has not been explored in the context of individual organ development; the common focus of developmental biology studies. Because developmental processes are often associated with initially subtle changes in gene expression, here we explored whether neighbouring genes are informative in the identification of differentially expressed genes. First, we quantified the chromosomal neighbourhood patterns of genes having related functional roles in the mammalian genome. Although the majority of protein coding genes have at least five neighbours within 1 Mb window around each gene, very few of these neighbours regulate development of the same organ. Analyses of transcriptomes of developing mouse molar teeth revealed that whereas expression of genes regulating tooth development changes, their neighbouring genes show no marked changes, irrespective of their level of expression. Finally, we test whether inclusion of gene neighbourhood in the analyses of differential expression could provide additional benefits. For the analyses, we developed an algorithm, called DELocal that identifies differentially expressed genes by comparing their expression changes to changes in adjacent genes in their chromosomal regions. Our results show that DELocal removes detection bias towards large changes in expression, thereby allowing identification of even subtle changes in development. Future studies, including the detection of differential expression, may benefit from, and further characterize the significance of gene-gene neighbour relationships.