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Holoprosencephaly (HPE) is the most common forebrain and craniofacial malformation syndrome in humans. The genetics of HPE suggest that it often stems from a synergistic interaction of mutations in independent loci. In mice, several combinations of mutations in Nodal signaling pathway components can give rise to HPE, but it is not clear whether modest deficits of Nodal signaling along with lesions in other pathways might also cause such defects. We find that HPE results from simultaneous reduction of Nodal signaling and an organizer BMP (bone morphogenetic protein) antagonist, either Chordin or Noggin. These defects result from reduced production of tissues that promote forebrain and craniofacial development. Nodal promotes the expression of genes in the anterior primitive streak that are important for the development of these tissues, whereas BMP inhibits their expression. Pharmacological and transgenic manipulation of these signaling pathways suggests that BMP and Nodal antagonize each other prior to intracellular signal transduction. Biochemical experiments in vitro indicate that secreted Bmp2 and Nodal can form extracellular complexes, potentially interfering with receptor activation. Our results reveal that the patterning of forebrain and medial craniofacial elements requires a fine balance between BMP and Nodal signaling during primitive streak development, and provide a potential mechanistic basis for a new multigenic model of HPE.