The notochord plays an important role in the differentiation of the paraxial mesoderm and the neural tube. We have analyzed the role of the notochord in somite differentiation and subsequent formation of the vertebral column using a mouse mutant, Danforth's short-tail (Sd). In this mutant, the skeletal phenotype is most probably a result of degeneration and subsequent loss of the notochord. The Sd gene is known to interact with undulated (un), a sclerotome mutant. Double mutants between Sd and un alleles show an increase in the severity of the defects, mainly in the ventral parts of the vertebrae. We also show that part of the Sd phenotype is strikingly similar to that of the un alleles. As un is known to be caused by a mutation in the Pax-1 gene, we analyzed Pax-1 expression in Sd embryos. In Sd embryos, Pax-1 expression is reduced, providing a potential molecular basis for the genetic interaction observed. A complete loss of Pax-1 expression in morphologically intact mesenchyme was found in the lower thoracic-lumbar region, which is phenotypically very similar to the corresponding region in a Pax-1 null mutant, Undulated short-tail. The sclerotome developmental abnormalities in Sd coincide closely, both in time and space, with notochordal changes, as determined by whole-mount T antibody staining. These findings indicate that an intact notochord is necessary for normal Pax-1 expression in sclerotome cells, which is in turn required for the formation of the ventral parts of the vertebrae. The observed correlation among structural changes of the notochord, Pax-1 expression levels and skeletal phenotypes, suggests that Pax-1 might be an intrinsic mediator of notochordal signals during the dorsoventral specification of vertebrae.