Tbx1^−/− mice present with phenotypic effects observed in DiGeorge syndrome patients however, the molecular mechanisms of Tbx1 regulating craniofacial and tooth development are unclear. Analyses of the Tbx1 null mice reveal incisor microdontia, small cervical loops and BrdU labeling reveals a defect in epithelial cell proliferation. Furthermore, Tbx1 null mice molars are lacking normal cusp morphology. Interestingly, p21 (associated with cell cycle arrest) is up regulated in the dental epithelium of Tbx1^−/− embryos. These data suggest that Tbx1 inhibits p21 expression to allow for cell proliferation in the dental epithelial cervical loop, however Tbx1 does not directly regulate p21 expression. A new molecular mechanism has been identified where Tbx1 inhibits Pitx2 transcriptional activity and decreases the expression of Pitx2 target genes, p21, Lef-1 and Pitx2c. p21 protein is increased in PITX2C transgenic mouse embryo fibroblasts (MEF) and chromatin immunoprecipitation assays demonstrate endogenous Pitx2 binding to the p21 promoter. Tbx1 attenuates PITX2 activation of endogenous p21 expression and Tbx1 null MEFs reveal increased Pitx2a and activation of Pitx2c isoform expression. Tbx1 physically interacts with the PITX2 C-terminus and represses PITX2 transcriptional activation of the p21, LEF-1, and Pitx2c promoters. Tbx1^−/+/Pitx2^−/+ double heterozygous mice present with an extra premolar-like tooth revealing a genetic interaction between these factors. The ability of Tbx1 to repress PITX2 activation of p21 may promote cell proliferation. In addition, PITX2 regulation of p21 reveals a new role for PITX2 in repressing cell proliferation. These data demonstrate new functional mechanisms for Tbx1 in tooth morphogenesis and provide a molecular basis for craniofacial defects in DiGeorge syndrome patients.