The specification of neural fate in Xenopus embryos has been shown to be under regulation by negative factors. The secreted protein bone morphogenetic protein-4 (BMP4) has been identified as one of these factors: in the early gastrula ectoderm, BMP4 can both inhibit neural fate and induce epidermis. In this study, we show that two other Xenopus BMP genes, BMP2 and BMP7, are endowed with the same types of activities. First, we show that expression of a dominant negative form of the BMP2 ligand, which blocks normal processing of the wild-type ligand, causes neuralization of Xenopus ectoderm. Second, we have isolated the Xenopus BMP2/7 receptor (XALK2) and generated a constitutively active mutant that signals in a ligand-independent manner. We show that signals from the activated BMP2/7 receptor also inhibit neuralization and induce epidermis in dissociated ectoderm cells. Consistent with both findings we show that secreted BMP2 and BMP7 ligands can also mediate neural inhibition and epidermal induction. These results suggest that both BMP2 and BMP7 may be involved independently or together with BMP4 in the inhibition of the neural fate and the onset of the epidermal induction pathway in vivo. This further supports the idea that epidermal induction is due to the effects of multiple signals from heterogeneous BMP genes.