Neural development in Drosophila is promoted by a family of basic helix-loop-helix (bHLH) transcription factors encoded within the Achaete Scute-Complex (AS-C). XASH-3, a Xenopus homolog of the Drosophila AS-C genes, is expressed during neural induction within a portion of the dorsal ectoderm that gives rise to the neural plate and tube. Here, we show that XASH-3, when expressed with the promiscuous binding partner XE12, specifically activates the expression of neural genes in naive ectoderm, suggesting that XASH-3 promotes neural development. Moreover, XASH-3/XE12 RNA injections into embryos lead to hypertrophy of the neural tube. Interestingly, XASH-3 misexpression does not lead to the formation of ectopic neural tissue in ventral regions, suggesting that the domain of XASH proneural function is restricted in the embryo. In contrast to the neural inducer noggin, which permanently activates the NCAM gene, the activation of neural genes by XASH-3/XE12 is not stable in naive ectoderm, yet XASH-3/XE12 powerfully and stably activates NCAM, Neurofilament and type III beta-tubulin gene expression in noggin-treated ectoderm. These results show that the XASH-3 promotes neural development, and suggest that its activity depends on additional factors which are induced in ectoderm by factors such as noggin.