Members of the bone morphogenetic protein (BMP) class of transforming growth factor beta (TGF beta)-related molecules have been implicated in a variety of inductive processes throughout vertebrate development. The 60A subclass of BMPs contains at least four vertebrate members, BMPs 5-8. We have shown by library screening and in situ hybridization that of these four genes, BMP 7 is expressed earliest, in gastrulating embryos. Furthermore, BMP 7 transcripts are present at diverse sites throughout development, in a pattern consistent with a role in a variety of inductive interactions. Recent studies have shown that BMP 2/7 heterodimers have unique activities compared to the corresponding homodimers. For this reason, we compared the patterns of expression of BMP 2 and BMP 7 using in situ hybridization. Our results demonstrate that these BMPs are coexpressed in a number of tissues that are known to be the source of inductive signals, including the zone of polarizing activity and apical ectodermal ridge of the developing limb and the notochord, raising the possibility that BMP 2/7 heterodimers may mediate aspects of these tissue interactions. We also show that BMP 2 transcripts are restricted within the developing gut to dorsal endoderm, whereas sonic hedgehog has been localized to ventral and medial regions of the developing gut endoderm. These markers provide the first molecular evidence for dorsal/ventral polarity in the developing gut.