Exposure of vertebrate embryos to ethanol causes cyclopia, but little is known about the underlying mechanisms of this effect. Here we show that cyclopia can be induced in the zebrafish by a short ethanol treatment during early gastrula stages and is accompanied by loss of gene expression characteristic of the ventral aspects of the fore- and midbrain. Interestingly, defects in the expression of ventral brain markers are linked to impaired migration of the prechordal plate mesoderm indicating that the correct position of the prechordal plate mesoderm under the anterior neural plate in the zebrafish embryo is required for specification of the anterior neural midline. Ethanol-induced cyclopia does not, however, impair the induction of anterior neuroectodermal structures in general. Finally, as genes like goosecoid and islet-1 are expressed in prechordal plate cells in a temporal pattern similar to control embryos despite the ectopic position of expressing cells, it appears that regulation of prechordal plate-specific gene expression is largely independent of the final position of the prechordal plate.