The zebrafish epithalamus is part of the diencephalon and encompasses three major components: the pineal, the parapineal and the habenular nuclei. Using sox2 knockdown, we show here that this key transcriptional regulator has pleiotropic effects during the development of these structures. Sox2 negatively regulates pineal neurogenesis. Also, Sox2 is identified as the unknown factor responsible for pineal photoreceptor prepatterning and performs this function independently of the BMP signaling. The correct levels of sox2 are critical for the functionally important asymmetrical positioning of the parapineal organ and for the migration of parapineal cells as a coherent structure. Deviations from this strict control result in defects associated with abnormal habenular laterality, which we have documented and quantified in sox2 morphants.