The Ovo gene family encodes a group of evolutionarily conserved transcription factors and includes members that reside downstream of key developmental signaling pathways such as Wg/Wnt and BMP/TGF-beta. In the current study, we explore the function of Ovol2, one of three Ovo paralogues in mice. We report that Ovol2 is expressed during early-mid embryogenesis, particularly in the inner cell mass at E3.5, in epiblast at E6.5, and at later stages in ectodermally derived tissues such as the rostral surface (epidermal) ectoderm. Embryos in which Ovol2 is ablated exhibit lethality by E10.5, prior to which they display severe defects including an open cranial neural tube. The neural defects are associated with improper Shh expression in the underlying rostral axial mesoderm and localized changes of neural marker expression along the dorsoventral axis, as well as with expanded cranial neural tissue and reduced cranial surface ectoderm culminating in a lateral shift of the neuroectoderm/surface ectoderm border. We propose that these defects reflect the involvement of Ovol2 in independent processes such as regionalized gene expression and neural/non-neural ectodermal patterning. Additionally, we present evidence that Ovol2 is required for efficient migration and survival of neural crest cells that arise at the neuroectoderm/surface ectoderm border, but not for their initial formation. Collectively, our studies indicate that Ovol2 is a key regulator of neural development and reveal a previously unexplored role for Ovo genes in mammalian embryogenesis.