The Pax6 transcription factor is required for multiple aspects of vertebrate eye development. The Pax6 gene encodes isoforms that either contain (Pax6+PD) or lack (Pax6DeltaPD) the N-terminal paired-box DNA-binding domain, in addition to the homeodomain. Alternative promoters control the expression of Pax6+PD and Pax6DeltaPD in the eye. Using a modified bacterial artificial chromosome (BAC) transgene that specifically expresses Pax6DeltaPD, but not paired-containing Pax6, in the normal endogenous pattern, we show that overexpression of Pax6DeltaPD causes a severe microphthalmic phenotype in both wild-type and Pax6-deficient (Sey(/+)) mice in a dosage-dependent manner. The microphthalmic phenotype is due to lens degeneration during embryonic development. Lens development initiates correctly, but cells in the lens undergo apoptotic cell death between E12 and E13. Concomitantly, in these mice, changes in Bmp4, Msx1, and Wnt2b expression were observed in the mesenchymal cells of the developing cornea. To visualize Pax6DeltaPD expression, we developed a dual-reporter Pax6 BAC transgene in which EGFP and DsRed demonstrate paired-containing and pairedless transcripts, respectively. In BAC transgenic mice, DsRed is predominantly expressed in the peripheral neural retina during early eye development, but not in the developing lens or cornea. Later DsRed is strongly expressed in the developing ciliary body, but not in the iris. We suggest that the ratio of Pax6+PD and Pax6DeltaPD isoforms in the distal retina is important for both cornea and lens development, either directly by controlling transcription of necessary growth factors or indirectly by controlling development of the distal neural retina.