BMP-4 is a transforming growth factor beta (TGF- beta) superfamily member which plays important roles in various developmental processes in vertebrate embryogenesis. In this study the expression pattern of BMP-4 was examined during early chick and quail embryonic development. Transcripts were found in the lateral ridges of the neural plate during neurulation and in dorsal regions of the neural tube after its closure along the whole length of the neural axis. To investigate the role of BMP-4 expressed in dorsal regions of the neural tube, cells producing BMP4 were grafted ectopically in the paraxial mesoderm in E2 chick embryos at the level of somites 16-22. Ectopic BMP4 induced Msx-1 and Msx-2 gene expression in superficial ectoderm and superficial mesodermal cells which normally do not express these transcription factors. Moreover, it could be seen that in the E9 operated embryos, additional cartilage had been induced at the level of the graft. These results suggest that BMP4 produced by dorsal regions of the neural tube acts as an endogenous inducing signal in the activation of the genes of the Msx family which are likely to be part of the cascade of molecular events leading to subcutaneous cartilage formation. Therefore, BMP-4 expression in the tissues located dorsally in the neural tube and superficial ectoderm is proposed to be involved in the development of the spinous process of the vertebra.