The midbrain-hindbrain boundary (MHB) acts as an organiser/signalling centre to pattern tectal and cerebellar compartments. Cells in adjacent compartments must be distinct from each other for boundary formation to occur at the interface. Here we have identified the leucine-rich repeat (LRR) neuronal 1 (Lrrn1) protein as a key regulator of this process in chick. The Lrrn family is orthologous to the Drosophila tartan/capricious (trn/caps) family. Differential expression of trn/caps promotes an affinity difference and boundary formation between adjacent compartments in a number of contexts; for example, in the wing, leg and eye imaginal discs. Here we show that Lrrn1 is expressed in midbrain cells but not in anterior hindbrain cells. Lrrn1 is down-regulated in the anterior hindbrain by the organiser signalling molecule FGF8, thereby creating a differential affinity between these two compartments. Lrrn1 is required for the formation of MHB--loss of function leads to a loss of the morphological constriction and loss of Fgf8. Cells overexpressing Lrrn1 violate the boundary and result in a loss of cell restriction between midbrain and hindbrain compartments. Lrrn1 also regulates the glycosyltransferase Lunatic Fringe, a modulator of Notch signalling, maintaining its expression in midbrain cells which is instrumental in MHB boundary formation. Thus, Lrrn1 provides a link between cell affinity/compartment segregation, and cell signalling to specify boundary cell fate.