The vertebrate nervous system is initially induced from a section of dorsal ectoderm by signal(s) from the underlying dorsal mesoderm during gastrulation. In an effort to identify the neural inducing factor(s) emanating from the dorsal mesoderm, we have examined the inductive action of various growth factors by applying them to ectoderm cells from Xenopus gastrulae (8- to 12.5-hour age; embryonic stage 9+ to 11 1/2) in a microculture system. Monoclonal antibodies that specifically recognize cellular differentiation antigens from three distinct ectoderm lineages (N1 for CNS neurons from neural tube, Me1 for melanophores from neural crest and E3 for skin epidermal cells from epidermal lineages, respectively) and a mesoderm lineage (Mu1 for muscle cells) were used as markers to monitor the differentiation of cultured ectoderm cells. We found that basic fibroblast growth factor (bFGF) was capable of specifically and reproducibly inducing gastrula ectoderm cells to produce CNS neurons and melanophores at concentrations as low as 5 pM, a value about 50-fold lower than that required to induce the formation of muscle cells from blastula animal cap cells (6-hour age; stage 8+). The induction of neural lineages by bFGF was correlated with a suppression of epidermal differentiation in a dose-dependent manner. bFGF never induced the formation of muscle cells from gastrula ectoderm cells even at concentrations as high as 5 nM. The response of ectoderm cells to bFGF changed dramatically during gastrulation. Ectoderm cells from early (8- to 9-hour age; stage 9+ to 10) gastrula gave rise to CNS neurons, but yielded few melanophores. As ectoderm cells were prepared from gastrulae of increasing age, their competence to form neurons was gradually lost, whereas the production of melanophores was enhanced and peaked in 11-hour gastrula (stage 10 1/2). The ability to form both neurons and melanophores was substantially reduced in 12.5-hour gastrula (stage 11 1/2). By examining ectoderm cells from the ventral and dorsal sides independently, it was also shown that during gastrulation the change in response to bFGF of the ventral ectoderm preceded that of the dorsal ectoderm. The state of competence of the ectoderm changed primarily due to intrinsic factors rather than by instruction from other parts of the gastrula embryo. This was shown by adding bFGF to cultures of ectoderm cells that were isolated at 9-hour (stage 10) and cultured for increasing periods to allow their autonomous development. The time course of both loss of neuronal competence and gain and loss of melanophore competence closely paralleled that observed in vivo during gastrulation.(ABSTRACT TRUNCATED AT 400 WORDS)