Maternal alcohol abuse during pregnancy is one of the leading causes of birth defects in humans. Despite extensive studies, the molecular basis is still not clear. Here we transiently exposed Xenopus embryos to alcohol and showed that alcohol dose-dependently produced microcephaly and growth retardation. Moreover, it reduced the expression of several key neural genes (xPax6, xOtx2, xSox3, xSox2, and xNCAM), of which xPax6 was most vulnerable. An alcohol concentration as low as 0.3% could produce more than 90% reduction of xPax6 expression. Consistently, microinjection of xPax6 expression plasmid to Xenopus embryos dose-dependently rescued alcohol-induced microcephaly and restored the expression of xOtx2, xSox3, xSox2, and xNCAM. To test whether reactive oxygen species (ROS) is the upstream signal for alcohol-induced microcephaly and xPax6 suppression, we overexpressed catalase in Xenopus embryos and found that catalase not only decreased alcohol-induced H(2)O(2) formation, but also fully restored Pax6 expression and reversed microcephaly. In contrast, xPax6 and catalase could only provide partial protection against growth retardation. Results from this study illustrate for the first time the critical role of H(2)O(2)-mediated Pax6 suppression in alcohol-induced microcephaly and suggest the presence of additional mechanisms for alcohol-induced fetal growth retardation.