Retinoic acid (RA) synthesized by Raldh3 in the frontonasal surface ectoderm of chick embryos has been suggested to function in early forebrain patterning by regulating Fgf8, Shh, and Meis2 expression. Similar expression of Raldh3 exists in E8.75 mouse embryos, but Raldh2 is also expressed in the optic vesicle at this stage suggesting that both genes may play a role in early forebrain patterning. Furthermore, Raldh3 is expressed later in the forebrain itself (lateral ganglionic eminence; LGE) starting at E12.5, suggesting a later role in forebrain neurogenesis. Here we have analyzed mouse embryos carrying single or double null mutations in Raldh2 and Raldh3 for defects in forebrain development. Raldh2(-/-);Raldh3(-/-) embryos completely lacked RA signaling activity in the early forebrain, but exhibited relatively normal expression of Fgf8, Shh, and Meis2 in the forebrain. Thus, we find no clear requirement for RA in controlling expression of these important forebrain patterning genes, but Raldh3 expression in the frontonasal surface ectoderm was found to be needed for normal Fgf8 expression in the olfactory pit. Our studies revealed that later expression of Raldh3 in the subventricular zone of the LGE is required for RA signaling activity in the ventral forebrain. Importantly, expression of dopamine receptor D2 in E18.5 Raldh3(-/-) embryos was essentially eliminated in the developing nucleus accumbens, a tissue lying close to the source of RA provided by Raldh3. Our results suggest that the role of RA during forebrain development begins late when Raldh3 expression initiates in the ventral subventricular zone.