Aims/hypothesis. Several studies have shown that maternal diabetes increases the risk of congenital malformations in various organ systems including the neural tube. The present study analysed molecular and morphological changes in the forebrain of embryos from diabetic Albino Swiss mice. Methods. Maternal diabetes-induced morphological changes in the forebrain were examined histologically. Cell proliferation index was assayed by BrdU labelling. In situ hybridisation and quantitative real-time PCR were used to analyse the expression of genes coding for sonic hedgehog (Shh), Nkx2.1, brain factor-1 (BF-1) and bone morphogenetic protein-4 (Bmp4) that control forebrain patterning.Results. There were no distinguishable abnormalities in the forebrain of embryos from diabetic pregnancies on embryonic day 0.5. At embryonic day 11.5, embryos of diabetic pregnancies displayed a fusion and thickening of the ventral telencephalic neuroepithelium and a partial absence of the dorsal telencephalon, indicating a severe patterning defect in the dorsoventral axis of the telencephalon. The cell proliferation index was also higher in the ventral telencephalon of these embryos. Molecular analyses indicated that expression of Shh, Nkx2.1 and BF-1 was increased and their expression domains expanded dorsally in the ventral telencephalon in embryos of diabetic mice at embryonic day 11.5. The expression of Bmp4 was reduced in the dorsal forebrain of these embryos. At embryonic day 8.5, only Shh expression was increased. Conclusions/interpretation. Altered expression of various genes involved in dorsoventral patterning of the forebrain is associated with forebrain malformations in embryos of diabetic mice. [Diabetologia (2004) 47:523-531]