In amphibians and other vertebrates, neural development is induced in the ectoderm by signals coming from the dorsal mesoderm during gastrulation. Classical embryological results indicated that these signals follow a "vertical" path, from the involuted dorsal mesoderm to the overlying ectoderm. Recent work with the frog Xenopus laevis, however, has revealed the existence of "planar" neural-inducing signals, which pass within the continuous sheet or plane of tissue formed by the dorsal mesoderm and presumptive neurectoderm. Much of this work has made use of Keller explants, in which dorsal mesoderm and ectoderm are cultured in a planar configuration with contact along only a single edge, and vertical contact is prevented. Planar signals can induce the full anteroposterior (A-P) extent of neural pattern, as evidenced in Keller explants by the expression of genes that mark specific positions along the A-P axis. In this review, classical and modern molecular work on vertical and planar induction will be discussed. This will be followed by a discussion of various models for vertical induction and planar induction. It has been proposed that the A-P pattern in the nervous system is derived from a parallel pattern of inducers in the dorsal mesoderm which is "imprinted" vertically onto the overlying ectoderm. Since it is now known that planar signals can also induce A-P neural pattern, this kind of model must be reassessed. The study of planar induction of A-P pattern in Xenopus embryos provides a simple, manipulable, two-dimensional system in which to investigate pattern formation.