Mutations in Notch2, Jagged1 or homologs of the Hairy-related transcriptional repressor Hey2 cause congenital malformations involving the non-chamber atrioventricular canal (AVC) and inner curvature (IC) regions of the heart, but the underlying mechanisms have not been investigated. By manipulating signaling directly within the developing chick heart, we demonstrated that Notch2, Hey1 and Hey2 initiate a signaling cascade that delimits the non-chamber AVC and IC regions. Specifically, misactivation of Notch2 signaling, or misexpression of either Hey1 or Hey2, repressed Bmp2. Because Jagged (also known as Serrate in non-mammalian species) ligands were found to be present in prospective chamber myocardium, these data support the model that Notch2 and Hey proteins cause the progressive restriction of Bmp2 expression to within the developing AVC and IC, where it is essential for differentiation. Misactivation or inhibition of Notch2 specifically induced or inhibited Hey1, respectively, but these manipulations did not affect Hey2, implicating Hey1 as the direct mediator of Notch2. Bmp2 within the developing AVC and IC has been shown to induce Tbx2, and we found that Tbx2 misexpression inhibited the expression of both Hey1 and Hey2. Tbx2, therefore, is envisaged to constitute a feedback loop that sharpens the border with the developing AVC and IC by delimiting Hey gene expression to within prospective chamber regions. Analysis of the loss-of-function phenotype in mouse embryos homozygous for targeted disruption of Hey2 revealed an expanded AVC domain of Bmp2. Similarly, zebrafish gridlock (Hey2 homolog) mutant embryos showed ectopic expression of Bmp4, which normally marks AVC myocardium in this species. Thus, Hey pathway regulation of cardiac Bmp appears to be an evolutionarily conserved mechanism to delimit AVC and IC fate, and provides a potential mechanistic explanation for cardiac malformations caused by mutations in Serrate/Jagged1 and Notch signaling components.