The zinc finger transcription factor Gli3 is an essential mediator of hedgehog signaling. Gli3 has a dynamic expression pattern during embryonic development. In the neural tube, Gli3 transcripts are patterned along the anteroposterior and dorsoventral axes such that the initial broad expression in the posterior neural tube becomes dorsally restricted as neurogenesis takes place. Little is known about the molecular mechanisms that regulate this dynamic expression. Here, we report on a phylogenetic analysis of the Gli3 locus that uncovered a novel regulatory element, HCNE1. HCNE1 contains a compound Pbx/Meis binding site that binds Pbx and Meis/Prep proteins in vitro and in vivo. We show that HCNE1 recapitulates Gli3 expression in the developing neural tube and that mutations in the Pbx/Meis binding site affect the spatiotemporal control of HCNE1 transcriptional activity. Ectopic expression or loss of function of Pbx and Meis/Prep proteins in the chick and mouse embryo results in aberrant expression of endogenous Gli3 transcripts. We propose a novel role for TALE proteins in establishing the correct spatiotemporal expression pattern of Gli3 in the vertebrate spinal cord, thus implicating TALE transcription factors in early embryonic patterning events controlled by Sonic hedgehog signaling.