During development of the CNS, stem and progenitor cell proliferation, cell fate designation, and patterning decisions are tightly regulated by interdependent networks of key transcriptional regulators. In a genetic approach we analyzed divergent functionality of the PAI and RED sub-domains of the Pax6 Paired domain (PD) during progenitor zone formation, motor and interneuron development, and peripheral connectivity at distinct levels within the neural tube: within the hindbrain, mutation of the PAI sub-domain severely affected patterning of the p3 and pMN domains and establishment of the corresponding motor neurons. Exit point designation of hypoglossal axons was disturbed in embryos harboring either mutations in the PD sub-domains or containing a functional Pax6 Null allele. At brachial spinal levels, we propose a selective involvement of the PAI sub-domain during patterning of ventral p2 and pMN domains, critically disturbing generation of specific motor neuron subtypes and increasing V2 interneuron numbers. Our findings present a novel aspect of how Pax6 not only utilizes its modular structure to perform distinct functions via its paired and homeodomain. Individual sub-domains can exert distinct functions, generating a new level of complexity for transcriptional regulation by one single transcription factor not only in dorso-ventral, but also rostro-caudal neural tube patterning.