During early development of the nervous system in vertebrates, expression of the homeobox gene Anf/Hesx1/Rpx is restricted to the anterior neural plate subdomain corresponding to the presumptive forebrain. This expression is essential for normal forebrain development and ectopic expression of Xenopus Anf, Xanf1 (also known as Xanf-1), results in severe forebrain abnormalities. By use of transgenic embryos and a novel bi-colour reporter technique, we have identified a cis-regulatory element responsible for transcriptional repression of Xanf1 that defines its posterior expression limit within the neural plate. Using this element as the target in a yeast one-hybrid system, we identified two transcription factors, FoxA4a/Pintallavis and Xvent2 (also known as Xvent-2), which are normally expressed posterior to Xanf1. Overexpression of normal and dominant-negative versions of these factors, as well as inhibition of their mRNA translation by antisense morpholinos, show that they actually function as transcriptional repressors of Xanf1 just behind its posterior expression limit. The extremely high similarity of the identified Anf cis-regulatory sequences in Xenopus, chick and human, indicates that the mechanism restricting posterior expression of Anf in Xenopus is shared among vertebrates. Our findings support Nieuwkoop's activation-transformation model for neural patterning, according to which the entire neurectoderm is initially specified towards an anterior fate, which is later suppressed posteriorly as part of the trunk formation process.