We have investigated the molecular interactions underlying neural crest formation in Xenopus. Using chordin overexpression to antagonize endogenous BMP signaling in whole embryos and explants, we demonstrate that such inhibition alone is insufficient to account for neural crest induction in vivo. We find, however, that chordin-induced neural plate tissue can be induced to adopt neural crest fates by members of the FGF and Wnt families, growth factors that have previously been shown to posteriorize induced neural tissue. Overexpression of a dominant negative XWnt-8 inhibits the expression of neural crest markers, demonstrating the necessity for a Wnt signal during neural crest induction in vivo. The requirement for Wnt signaling during neural crest induction is shown to be direct, whereas FGF-mediated neural crest induction may be mediated by Wnt signals. Overexpression of the zinc finger transcription factor Slug, one of the earliest markers of neural crest formation, is insufficient for neural crest induction. Slug-expressing ectoderm will generate neural crest in the presence of Wnt or FGF-like signals, however, bypassing the need for BMP inhibition in this process. A two-step model for neural crest induction is proposed.