Aberrant embryonic development of the hypothalamus and/or pituitary gland in humans results in congenital hypopituitarism (CH). Transcription factor 7-like 1 (TCF7L1), an important regulator of the WNT/β-catenin signaling pathway, is expressed in the developing forebrain and pituitary gland, but its role during hypothalamo-pituitary (HP) axis formation or involvement in human CH remains elusive. Using a conditional genetic approach in the mouse, we first demonstrate that TCF7L1 is required in the prospective hypothalamus to maintain normal expression of the hypothalamic signals involved in the induction and subsequent expansion of Rathke's pouch progenitors. Next, we reveal that the function of TCF7L1 during HP axis development depends exclusively on the repressing activity of TCF7L1 and does not require its interaction with β-catenin. Finally, we report the identification of two independent missense variants in human TCF7L1, p.R92P and p.R400Q, in a cohort of patients with forebrain and/or pituitary defects. We demonstrate that these variants exhibit reduced repressing activity in vitro and in vivo relative to wild-type TCF7L1. Together, our data provide support for a conserved molecular function of TCF7L1 as a transcriptional repressor during HP axis development in mammals and identify variants in this transcription factor that are likely to contribute to the etiology of CH.