The isthmic organizer, which patterns the anterior hindbrain and midbrain, is one of the most studied secondary organizers. In recent years, new insights have been reported on the molecular nature of its morphogenetic activity. Studies in chick, mouse and zebrafish have converged to show that mutually repressive interactions between the homeoproteins encoded by Otx and Gbx genes position this organizer in the neural primordia. We present evidence that equivalent, in addition to novel, interactions between these and other genes operate in Xenopus embryos to position the isthmic organizer. We made use of fusion proteins in which we combined Otx2 or Gbx2 homeodomains with the E1A activation domain or the EnR repressor element which were then injected into embryos. Our results show that Otx2 and Gbx2 are likely to be transcriptional repressors, and that these two proteins repress each other transcription. Our experiments show that the interaction between these two proteins is required for the positioning of the isthmic organizer genes Fgf8, Pax2 and En2. In this study we also developed a novel in vitro assay for the study of the formation of this organizer. We show that conjugating animal caps previously injected with Otx2 and Gbx2 mRNAs recreate the interactions required for the induction of the isthmic organizer. We have used this assay to determine which cells produce and which cells receive the Fgf signal. Finally, we have added a novel genetic element to this process, Xiro1, which encode another homeoprotein. We show that the Xiro1 expression domain overlaps with territories expressing Otx2, Gbx2 and Fgf8. By expressing wild-type or dominant negative forms of Xiro1, we show that this gene activates the expression of Gbx2 in the hindbrain. In addition, Xiro1 is required in the Otx2 territory to allow cells within this region to respond to the signals produced by adjacent Gbx2 cells. Moreover, Xiro1 is absolutely required for Fgf8 expression at the isthmic organizer. We discuss a model where Xiro1 plays different roles in regulating the genetic cascade of interactions between Otx2 and Gbx2 that are necessary for the specification of the isthmic organizer.