We have isolated a novel Xenopus homolog of the Drosophila achaete-scute genes, called XASH-3. XASH-3 expression is neural specific and is detected as early as stage 11 1/2, making it one of the earliest markers of neural induction so far described. Moreover, XASH-3 expression within the neural plate is regionally restricted. Transverse bands of XASH-3 mRNA mark discrete positions along the anteroposterior axis, while longitudinal bands mark a discrete position along the mediolateral axis. This latter site of XASH-3 expression appears to demarcate the prospective sulcus limitans, a boundary zone that later separates the functionally distinct dorsal (alar) and ventral (basal) regions of the spinal cord. In sandwich explants lacking any underlying mesoderm, XASH-3 is expressed in longitudinal stripes located lateral to the midline. This provides the first indication that planar or midline-derived inductive signals are sufficient to establish at least some aspects of positional identity along the mediolateral axis of the neural plate. By contrast, the transverse stripes of XASH-3 expression are not detected, suggesting that this aspect of anteroposterior neural pattern is lost or delayed in the absence of vertically passed signals. The restricted mediolateral expression of XASH-3 suggests that mediolateral patterning of the neural plate is an early event, and that this regionalization can be achieved in the absence of inducing signals derived from underlying mesoderm.