Holoprosencephaly (HPE), a defect in midline patterning of the forebrain and midface, arises ~1 in 250 conceptions. It is associated with predisposing mutations in the Nodal and Hedgehog (HH) pathways, with penetrance and expressivity graded by genetic and environmental modifiers, via poorly understood mechanisms. CDON is a multifunctional co-receptor, including for the HH pathway. In mice, Cdon mutation synergizes with fetal alcohol exposure, producing HPE phenotypes closely resembling those seen in humans. We report here that, unexpectedly, Nodal signaling is a major point of synergistic interaction between Cdon mutation and fetal alcohol. Window-of-sensitivity, genetic, and in vitro findings are consistent with a model whereby brief exposure of Cdon mutant embryos to ethanol during gastrulation transiently and partially inhibits Nodal pathway activity, with consequent effects on midline patterning. These results illuminate mechanisms of gene-environment interaction in a multifactorial model of a common birth defect.