The dorsal ectoderm of the vertebrate gastrula was proposed by Nieuwkoop to be specified towards an anterior neural fate by an activation signal, with its subsequent regionalization along the anteroposterior (AP) axis regulated by a graded transforming activity, leading to a properly patterned forebrain, midbrain, hindbrain and spinal cord. The activation phase involves inhibition of BMP signals by dorsal antagonists, but the later caudalization process is much more poorly characterized. Explant and overexpression studies in chick, Xenopus, mouse and zebrafish implicate lateral/paraxial mesoderm in supplying the transforming influence, which is largely speculated to be a Wnt family member. We have analyzed the requirement for the specific ventrolaterally expressed Wnt8 ligand in the posteriorization of neural tissue in zebrafish wild-type and Nodal-deficient embryos (Antivin overexpressing or cyclops;squint double mutants), which show extensive AP brain patterning in the absence of dorsal mesoderm. In different genetic situations that vary the extent of mesodermal precursor formation, the presence of lateral wnt8-expressing cells correlates with the establishment of AP brain pattern. Cell tracing experiments show that the neuroectoderm of Nodal-deficient embryos undergoes a rapid anterior-to-posterior transformation in vivo during a short period at the end of the gastrula stage. Moreover, in both wild-type and Nodal-deficient embryos, inactivation of Wnt8 function by morpholino (MO(wnt8)) translational interference dose-dependently abrogates formation of spinal cord and posterior brain fates, without blocking ventrolateral mesoderm formation. MO(wnt8) also suppresses the forebrain deficiency in bozozok mutants, in which inactivation of a homeobox gene causes ectopic wnt8 expression. In addition, the bozozok forebrain reduction is suppressed in bozozok;squint;cyclops triple mutants, and is associated with reduced wnt8 expression, as seen in cyclops;squint mutants. Hence, whereas boz and Nodal signaling largely cooperate in gastrula organizer formation, they have opposing roles in regulating wnt8 expression and forebrain specification. Our findings provide strong support for a model of neural transformation in which a planar gastrula-stage Wnt8 signal, promoted by Nodal signaling and dorsally limited by Bozozok, acts on anterior neuroectoderm from the lateral mesoderm to produce the AP regional patterning of the CNS.