Renal-coloboma syndrome, also known as papillorenal syndrome, is an autosomal dominant human disorder in which optic disc coloboma is associated with kidney abnormalities. Mutations in the paired domain transcription factor PAX2 have been found to be the underlying cause of this disease. Disease severity varies between patients, and in some cases, renal hypoplasia has been found in the absence of any retinal defects. Here we report an N-ethyl-N-nitrosourea-induced mouse mutation, Opdc, which is an isoleucinetothreonine missense mutation, I40T, in the first α-helix of the Pax2 paired domain. The mutant protein binds target DNA sequences less strongly than the wild-type protein and acts poorly to transactivate target promoters in culture. The phenotypic consequence of this mutation on the development of the eye and ear is similar to that reported for null alleles of Pax2. However, in homozygotes, cerebellar development is normal on a genetic background in which loss of Pax2 results in failure of cerebellar formation. Moreover, there is a genetic background effect on the heterozygous phenotype such that on some strain backgrounds, kidney development is unaffected. Opdc is the first hypomorphic mutation reported for Pax2 that differs in phenotype from loss-of-function mutations. These results suggest that PAX2 is a strong candidate gene for cases in which human patients have optic disc coloboma not associated with renal dysplasia.