Bone morphogenetic proteins (BMPs) are peptide growth factors belonging to the TGF-beta superfamily. A large number of these ligands, including BMP-2, -4 and -7 is expressed during early embryogenesis in the vertebrate embryo. In this study, we demonstrate that BMP-7 has ventralizing activity both in ectodermal explants as well as in whole embryos. As it was the case for BMP-2 and BMP-4, BMP-7 is a very poor inducer when provided as a homodimer protein. Because of this weak mesoderm inducing activity, it has been suggested that mesoderm induction by BMPs might represent an artifact of overexpression. We provide evidence demonstrating that unlike the homodimers of BMP-4 or BMP-7, the purified recombinant heterodimer of Xenopus BMP-4 and BMP-7 (BMP-4/7) has a potent mesoderm inducing activity at physiological concentrations. These results provide the first evidence for an embryonic function of BMP-4/7 heterodimers in the vertebrate embryo.