Sox2 marks dental epithelial stem cells (DESC) in both mammals and reptiles, and in this report we demonstrate several Sox2 transcriptional mechanisms that regulate dental stem cell fate and incisor growth. Conditional Sox2 deletion in the oral and dental epithelium results in severe craniofacial defects, including impaired dental stem cell proliferation, arrested incisor development and abnormal molar development. The murine incisor develops initially but is absorbed independent of apoptosis due to a lack of progenitor cell proliferation and differentiation. Tamoxifen induced inactivation of Sox2 demonstrates the requirement of Sox2 for maintenance of the DESCs in adult mice. Conditional overexpression of Lef-1 in mice increases DESC proliferation and creates a new labial cervical loop stem cell compartment, which produces rapidly growing long tusk-like incisors, and Lef-1 epithelial overexpression partially rescues the tooth arrest in Sox2 conditional knockout mice. Mechanistically, Pitx2 and Sox2 interact physically and regulate Lef-1, Pitx2 and Sox2 expression during development. Thus, we have uncovered a Pitx2:Sox2:Lef-1 transcriptional mechanism that regulates DESC homeostasis and dental development.