We have studied the role of Bmp signaling in patterning neural tissue through the use of mutants in the zebrafish that disrupt three different components of a Bmp signaling pathway: swirl/bmp2b, snailhouse/bmp7 and somitabun/smad5. We demonstrate that Bmp signaling is essential for the establishment of the prospective neural crest and dorsal sensory Rohon-Beard neurons of the spinal cord. Moreover, Bmp signaling is necessary to limit the number of intermediate-positioned lim1+ interneurons of the spinal cord, as observed by the dramatic expansion of these prospective interneurons in many mutant embryos. Our analysis also suggests a positive role for Bmp signaling in the specification of these interneurons, which is independent of Bmp2b/Swirl activity. We found that a presumptive ventral signal, Hh signaling, acts to restrict the amount of dorsal sensory neurons and trunk neural crest. This restriction appears to occur very early in neural tissue development, likely prior to notochord or floor plate formation. A similar early role for Bmp signaling is suggested in the specification of dorsal neural cell types, since the bmp2b/swirl and bmp7/snailhouse genes are only coexpressed during gastrulation and within the tail bud, and are not found in the dorsal neural tube or overlying epidermal ectoderm. Thus, a gastrula Bmp2b/Swirl and Bmp7/Snailhouse-dependent activity gradient may not only act in the specification of the embryonic dorsoventral axis, but may also function in establishing dorsal and intermediate neuronal cell types of the spinal cord.