The posterior nervous system, including the hindbrain and the spinal cord, has been shown to be formed by the transformation of neural plate of anterior character by signals derived from non-axial mesoderm. Although secreted factors, such as fibroblast growth factors (FGFs), Wnts, retinoic acid (RA) and Nodal, have been proposed to be the posteriorizing factors, the mechanism how neural tissue of posterior character is induced and subsequently specified along the anteroposterior axis remains elusive. To identify intercellular signaling molecules responsible for posteriorization of the neural plate as well as to find molecules induced intracellularly by the posteriorizing signal in the caudal neural plate, we screened by in situ hybridization for genes specifically expressed in posterior tissues, including the posterior neural plate and non-axial mesoderm when posteriorization of the neural plate takes place. From a subtracted library differentiating anterior versus posterior neural plate, 420 cDNA clones were tested, out of which 76 cDNA fragments showed expression restricted to the posterior tissue. These clones turned out to represent 32 different genes, including one novel secreted factor and one transmembrane protein. Seven genes were induced by non-axial mesodermal implants and bFGF beads, suggesting that these are among the early-response genes of the posteriorizing signal. Thus, our approach employing cDNA subtraction and subsequent expression pattern screening allows us to clone candidate genes involved in a novel signaling pathway contributing to the formation of the posterior nervous system.