During vertebrate embryogenesis, the paraxial mesoderm becomes segmented into somites, which form as paired epithelial spheres with a periodicity that reflects the segmental organization of the embryo. As a somite matures, the ventral region gives rise to a mesenchymal cell population, the sclerotome, that forms the axial skeleton. The dorsal region of the somite remains epithelial and is called dermomyotome. The dermomyotome gives rise to the trunk and limb muscle and to the dermis of the back. Epaxial and hypaxial muscle precursors can be attributed to distinct somitic compartments which are laid down prior to overt somite differentiation. Inductive signals from the neural tube, notochord, and overlying ectoderm have been shown to be required for patterning of the somites into these different compartments. Paraxis is a basic helix-loop-helix transcription factor expressed in the unsegmented paraxial mesoderm and throughout epithelial somites before becoming restricted to epithelial cells of the dermomyotome. To determine whether paraxis might be a target for inductive signals that influence somite patterning, we examined the influence of axial structures and surface ectoderm on paraxis expression by performing microsurgical operations on chick embryos. These studies revealed two distinct phases of paraxis expression, an early phase in the paraxial mesoderm that is dependent on signals from the ectoderm and independent of the neural tube, and a later phase that is supported by redundant signals from the ectoderm and neural tube. Under experimental conditions in which paraxis failed to be expressed, cells from the paraxial mesoderm failed to epithelialize and somites were not formed. We also performed an RT-PCR analysis of combined tissue explants in vitro and confirmed that surface ectoderm is sufficient to induce paraxis expression in segmental plate mesoderm. These results demonstrate that somite formation requires signals from adjacent cell types and that the paraxis gene is a target for the signal transduction pathways that regulate somitogenesis.