Two secreted signaling molecules, Xwnt-8 and BMP-4, play an essential role in the dorso-ventral patterning of the mesoderm in Xenopus. Here we investigate how the Wnt-8 and the BMP-4 pathways are connected and how they regulate target genes in the lateral and ventral marginal zone. BMP-4 regulates the transcription of Xwnt-8 in a threshold dependent manner. High levels of BMP-4 induce the expression of the Wnt antagonist sizzled in the ventral marginal zone, independent of Xwnt-8 signaling. Xwnt-8 induces the early muscle marker myf-5 in the lateral marginal zone in a BMP independent manner. The expression of the homeobox gene Xvent-1 can be modulated through both the BMP-4 and the Xwnt-8 pathways. The spatial distribution and the level of BMP-4 activity in the lateral and ventral marginal zone is reflected in the dynamic expression pattern of Xwnt-8. The data support the view that Xwnt-8 is involved in the specification of lateral (somitogenic) mesoderm and BMP-4 in the specification of ventral mesoderm.