Primary cilia have essential functions in vertebrate development and signaling. However, little is known about cilia function in brain morphogenesis, a process that is severely affected in human ciliopathies. Here, we study telencephalic morphogenesis in a mouse mutant for the ciliopathy gene Ftm (Rpgrip1l). We show that the olfactory bulbs are present in an ectopic location in the telencephalon of Ftm(-/-) fetuses and do not display morphological outgrowth at the end of gestation. Investigating the developmental origin of this defect, we have established that E12.5 Ftm(-/-) telencephalic neuroepithelial cells lack primary cilia. Moreover, in the anterior telencephalon, the subpallium is expanded at the expense of the pallium, a phenotype reminiscent of Gli3 mutants. This phenotype indeed correlates with a decreased production of the short form of the Gli3 protein. Introduction of a Gli3 mutant allele encoding the short form of Gli3 into Ftm mutants rescues both telencephalic patterning and olfactory bulb morphogenesis, despite the persistence of cilia defects. Together, our results show that olfactory bulb morphogenesis depends on primary cilia and that the essential role of cilia in this process is to produce processed Gli3R required for developmental patterning. Our analysis thus provides the first in vivo demonstration that primary cilia control a developmental process via production of the short, repressor form of Gli3. Moreover, our findings shed light on the developmental origin of olfactory bulb agenesis and of other brain morphogenetic defects found in human diseases affecting the primary cilium.