According to a recent model, the cortical tractor model, neural fold and neural crest formation occurs at the boundary between neural plate and epidermis because random cell movements become organized at this site. If this is correct, then a fold should form at any boundary between epidermis and neural plate. To test that proposition, we created new boundaries in axolotl embryos by juxtaposing pieces of neural plate and epidermis that would not normally participate in fold formation. These boundaries were examined superficially and histologically for the presence of folds, permitting the following observations. Folds form at each newly created boundary, and as many folds form as there are boundaries. When two folds meet they fuse into a hollow "tube" of neural tissue covered by epidermis. Sections reveal that these ectopic folds and "tubes" are morphologically similar to their natural counterparts. Transplanting neural plate into epidermis produces nodules of neural tissue with central lumens and peripheral nerve fibers, and transplanting epidermis into neural plate causes the neural tube and the dorsal fin to bifurcate in the region of the graft. Tissue transplanted homotypically as a control integrates into the host tissue without forming folds. When tissue from a pigmented embryo is transplanted into an albino host, the presence of pigment allows the donor cells to be distinguished from those of the host. Mesenchymal cells and melanocytes originating from neural plate transplants indicate that neural crest cells form at these new boundaries. Thus, any boundary between neural plate and epidermis denotes the site of a neural fold, and the behavior of cells at this boundary appears to help fold the epithelium. Since folds can form in ectopic locations on an embryo, local interactions rather than classical neural induction appear to be responsible for the formation of neural folds and neural crest.