Neural induction has long been known as the process by which the ectoderm of vertebrate embryos initiates neural development. During this inductive interaction, a region of the embryo called the organizer is a source of inducing signals that directs ectoderm away from an epidermal into a neural fate, thereby forming the neural plate and tube. In this review, we will discuss recent progress in characterizing two molecules in Xenopus embryos, noggin and follistatin, which appear to have many of the properties expected of neural inducers produced by the organizer. In addition, we will discuss progress that has been made in characterizing Xenopus homologs of the neurogenic and proneural genes that control the decision between a neural and epidermal fate in the Drosophila embryos. A model is presented in which these genes act downstream of neural induction in vertebrates to control the generation of neural precursor cells during neurogenesis.