The medial telencephalon is a source of neurons that follow distinct tangential trajectories of migration to various structures such as the cerebral cortex, striatum, and olfactory bulb. In the present study, we characterized the forebrain anomalies in Zic1/Zic3 compound mutant mice. Zic1 and Zic3 were strongly expressed in the medial structures, including the septum, medial cerebral cortex, and choroid plexus. Mice homozygous for the Zic1 mutant allele together with the null Zic3 allele showed medial forebrain defects, which were not obvious in either Zic1 or Zic3 single mutants. Absence of both Zic1 and Zic3 caused hypoplasia of the hippocampus, septum, and olfactory bulb. Analysis of the cell cycle revealed that the cell cycle exit rate was increased in the septa of double mutants. Misexpression of Zic3 in the ventricular layer of the cerebral cortex inhibited neuronal differentiation. These results indicated that both Zic1 and Zic3 function in maintaining neural precursor cells in an undifferentiated state. The functions of these genes may be essential to increasing neural cell numbers regionally in the medial telencephalon and to proper mediolateral patterning of the telencephalon.