When Xenopus gastrulae are made to misexpress Xwnt-8, or are exposed to lithium ions, they develop with a loss of anterior structures. In the current study, we have characterized the neural defects produced by either Xwnt-8 or lithium and have examined potential cellular mechanisms underlying this anterior truncation. We find that the primary defect in embryos exposed to lithium at successively earlier stages during gastrulation is a progressive rostral to caudal deletion of the forebrain, while hindbrain and spinal regions of the CNS remain intact. Misexpression of Xwnt-8 during gastrulation produces an identical loss of forebrain. Our results demonstrate that lithium and Wnts can act upon either prospective neural ectodermal cells, or upon dorsal mesodermal cells, to cause a loss of anterior pattern. Specifically, ectodermal cells isolated from lithium- or Wnt-exposed embryos are unable to form anterior neural tissue in response to inductive signals from normal dorsal mesoderm. In addition, although dorsal mesodermal cells from lithium- or Wnt-exposed embryos are specified properly, and produce normal levels of the anterior neural inducing molecules noggin and chordin, they show a greatly reduced capacity to induce anterior neural tissue in conjugated ectoderm. Taken together, our results are consistent with a model in which Wnt- or lithium-mediated signals can induce either mesodermal or ectodermal cells to produce a dominant posteriorizing morphogen which respecifies anterior neural tissue as posterior.