Neural crest cells (NCCs) within the mandibular and maxillary prominences of the first pharyngeal arch are initially competent to respond to signals from either region. However, mechanisms that are only partially understood establish developmental tissue boundaries to ensure spatially correct patterning. In the 'hinge and caps' model of facial development, signals from both ventral prominences (the caps) pattern the adjacent tissues whereas the intervening region, referred to as the maxillomandibular junction (the hinge), maintains separation of the mandibular and maxillary domains. One cap signal is GATA3, a member of the GATA family of zinc-finger transcription factors with a distinct expression pattern in the ventral-most part of the mandibular and maxillary portions of the first arch. Here, we show that disruption of Gata3 in mouse embryos leads to craniofacial microsomia and syngnathia (bony fusion of the upper and lower jaws) that results from changes in BMP4 and FGF8 gene regulatory networks within NCCs near the maxillomandibular junction. GATA3 is thus a crucial component in establishing the network of factors that functionally separate the upper and lower jaws during development.