Thalidomide, a sedative originally used to treat morning sickness and now used to treat leprosy and multiple myeloma, is also a teratogen that induces birth defects in humans such as limb truncations and microphthalmia. However, the teratogenic mechanism of action of this drug remains obscure. Thalidomide induces limb and eye defects in the chicken embryo at an EC50 of 50 microg/kg egg wt and apoptosis in primary human embryonic fibroblasts (HEFs) at an EC50 of 8.9 microM. Using these model systems, we demonstrate by semiquantitative reverse transcriptase-polymerase chain reaction and whole-mount in situ hybridization that thalidomide-induced oxidative stress enhances signaling through bone morphogenetic proteins (Bmps). This leads to up-regulation of the Bmp target gene and Wnt antagonist Dickkopf1 (Dkk1) with subsequent inhibition of canonical Wnt/beta-catenin signaling and increased cell death as shown by trypan blue and terminal deoxynucleotidyl transferase-mediated nick end labeling staining. Thalidomide-induced cell death was dramatically reduced in HEFs and in embryonic limb buds by the use of inhibitors against Bmps, Dkk1, and Gsk3beta, a beta-catenin antagonist acting downstream of Dkk1 in the Wnt pathway. Most interestingly, blocking of Dkk1 or Gsk3beta dramatically counteracts thalidomide-induced limb truncations and microphthalmia. From this, we conclude that perturbing of Bmp/Dkk1/Wnt signaling is central to the teratogenic effects of thalidomide.