Orofacial clefts, including cleft lip and palate (CL/P) and neural tube defects (NTDs) are among the most common congenital anomalies, but knowledge of the genetic basis of these conditions remains incomplete. The extent to which genetic risk factors are shared between CL/P, NTDs and related anomalies is also unclear. While identification of causative genes has largely focused on coding and loss of function mutations, it is hypothesized that regulatory mutations account for a portion of the unidentified heritability. We found that excess expression of Grainyhead-like 2 (Grhl2) causes not only spinal NTDs in Axial defects (Axd) mice but also multiple additional defects affecting the cranial region. These include orofacial clefts comprising midline cleft lip and palate and abnormalities of the craniofacial bones and frontal and/or basal encephalocele, in which brain tissue herniates through the cranium or into the nasal cavity. To investigate the causative mutation in the Grhl2Axd strain, whole genome sequencing identified an approximately 4 kb LTR retrotransposon insertion that disrupts the non-coding regulatory region, lying approximately 300 base pairs upstream of the 5' UTR. This insertion also lies within a predicted long non-coding RNA, oriented on the reverse strand, which like Grhl2 is over-expressed in Axd (Grhl2Axd) homozygous mutant embryos. Initial analysis of the GRHL2 upstream region in individuals with NTDs or cleft palate revealed rare or novel variants in a small number of cases. We hypothesize that mutations affecting the regulation of GRHL2 may contribute to craniofacial anomalies and NTDs in humans.