Formation of the lateral olfactory tract (LOT) and innervation of the piriform cortex represent fundamental steps to allow the transmission of olfactory information to the cerebral cortex. Several transcription factors, including the zinc finger transcription factor Gli3, influence LOT formation by controlling the development of mitral cells from which LOT axons emanate and/or by specifying the environment through which these axons navigate. Gli3 null and hypomorphic mutants display severe defects throughout the territory covered by the developing lateral olfactory tract, making it difficult to identify specific roles for Gli3 in its development. Here, we used Emx1Cre;Gli3fl/fl conditional mutants to investigate LOT formation and colonization of the olfactory cortex in embryos in which loss of Gli3 function is restricted to the dorsal telencephalon. These mutants form an olfactory bulb like structure which does not protrude from the telencephalic surface. Nevertheless, mitral cells are formed and their axons enter the piriform cortex though the LOT is shifted medially. Mitral axons also innervate a larger target area consistent with an enlargement of the piriform cortex and form aberrant projections into the deeper layers of the piriform cortex. No obvious differences were found in the expression patterns of key guidance cues. However, we found that an expansion of the piriform cortex temporally coincides with the arrival of LOT axons, suggesting that Gli3 affects LOT positioning and target area innervation through controlling the development of the piriform cortex.