Injection of DN-BR mRNA encoding a dominant negative type I receptor for bone morphogenetic protein 4 (BMP4) converted prospective ectoderm into neural tissue in Xenopus animal cap explants, in the absence of expression of mesodermal marker genes. The injected caps expressed a general neural marker NCAM and the forebrain marker opsin. Coinjection of wild-type BMP4 receptor mRNA completely reversed the neuralization by DN-BR. No expression of known neuralizing factors, i.e., noggin and follistatin, was detected in the DN-BR-injected animal caps. Furthermore, neuralization elicited by noggin or 3m, a LIM domain mutant of Xlim-1, was substantially inhibited by co-injection of BMP4 mRNA. Since BMP4 is expressed in the prospective ectoderm during gastrulation, our results suggest that the ventralizing factor BMP4 acts also as a physiological inhibitor of neuralization in the development of Xenopus ectoderm.