All-trans retinoic acid (RA) is well known as a biologically active form of vitamin A and a teratogen. The identification of nuclear receptors for this ligand suggests strongly that it is an endogenous signal molecule, and measurements of RA and teratogenic manipulations suggest further that RA is a morphogen specifying the anteroposterior axis during limb development. Besides the limb, RA and other retinoids affect development of other organs, including the central nervous system (CNS). None of these other effects has been investigated in detail. Our purpose here was to begin analysing the effects of RA on CNS development in Xenopus laevis. We find that RA acts on the developing CNS, transforming anterior neural tissue to a posterior neural specification. These and other findings raise the possibility that RA mediates an inductive interaction regulating anteroposterior differentiation within the CNS. Following recent reports implicating transforming growth factor-beta 2-like and fibroblast growth factor-like factors in mesoderm induction, this indicates that a different type of signal molecule (working through a nuclear receptor, not a plasma membrane receptor) might mediate inductive cell interactions during early embryonic development.