Near the floor plate of the embryonic neural tube there is a group of neuroepithelial precursor cells that are specialized for production of the oligodendrocyte lineage. We performed experiments to test whether specification of these neuroepithelial oligodendrocyte precursors, like other ventral neural cell types, depends on signals from the notochord and/or floor plate. We analyzed heterozygous Danforth's short tail (Sd/+) mutant mice, which lack a notochord and floor plate in caudal regions of the neural tube, and found that oligodendrocyte precursors did not appear at the ventricular surface where there was no floor plate. Moreover, oligodendrocytes did not develop in explant cultures of Sd/+ spinal cord in the absence of a floor plate. When a second notochord was grafted into an ectopic position dorsolateral to the endogenous notochord of a chicken embryo, an additional floor plate was induced along with an ectopic focus of oligodendrocyte precursors at the ventricular surface. Oligodendrocytes developed in explants of intermediate neural tube only when they were cocultured with fragments of notochord or in the presence of purified Sonic hedgehog (Shh) protein. Thus, signals from the notochord/floor plate, possibly involving Shh, are necessary and sufficient to induce the development of ventrally derived oligodendroglia. These signals appear to act by specifying the future fate(s) of neuroepithelial cells at the ventricular surface rather than by influencing the proliferation or differentiation of prespecified progenitor cells in the parenchyma of the cord.