In many developing organisms the establishment of axial polarity and the patterning of cells depend on local signals that derive from restricted regions of the embryo. In vertebrate embryos, the origins of tissue polarity have been examined extensively in the developing limb. The anteroposterior pattern of the chick limb seems to be controlled by a morphogen, possibly retinoic acid, that is enriched in a region of the limb known as the zone of polarizing activity (ZPA). Certain tissues other than the ZPA have also shown polarizing activity experimentally in the chick limb, raising the possibility that signalling molecules involved in pattern formation in different embryonic tissues are conserved. Here we provide evidence that a similar polarizing activity is also present in a restricted region of the developing central nervous system (CNS). We show that a specialized group of neural cells termed the floor plate, but not other regions of the CNS, mimics the ZPA in respecifying the digit pattern in the developing chick limb. In addition, using an in vitro biochemical assay, we show that the floor plate can synthesize retinoic acid and 3,4-didehydroretinol, the precursor of a second morphogenetically active retinoid, 3,4-didehydroretinoic acid. These results show that the floor plate is a local source of a ZPA-like polarizing signal, possibly a retinoid, which may regulate the pattern of cell differentiation in the developing CNS.