The lacrimal gland produces secretions that lubricate and protect the cornea of the eye. Foxc1 encodes a forkhead/winged helix transcription factor required for the development of many embryonic organs. Autosomal dominant mutations in human FOXC1 cause eye disorders such as Axenfeld-Rieger Syndrome and glaucoma iris hypoplasia, resulting from malformation of the anterior segment of the eye. We show here that lacrimal gland development is severely impaired in homozygous null Foxc1 mouse mutants, with reduced outgrowth and branching. Foxc1 is expressed in both the epithelium of the lacrimal gland and the surrounding mesenchyme. FGF10 stimulates the growth and branching morphogenesis in cultures of wild type and Foxc1 mutant gland epithelial buds. However, using micromass culture of lacrimal gland mesenchyme, we show that Bmp7 induces wild type mesenchyme cells to aggregate, but Foxc1 mutant cells do not respond. This study demonstrates that Foxc1 mediates the BMP signaling required for lacrimal gland development.