Signaling centers or organizers play a key role in axial patterning processes in animal embryogenesis. The function of most vertebrate organizers involves the activity of secreted antagonists of bone morphogenetic proteins (BMPs) such as Chordin or Noggin. Although BMP homologs have been isolated from many phyla, the evolutionary origin of the antagonistic BMP/Chordin system in organizer signaling is presently unknown. Here we describe a Chordin-like molecule (HyChdl) from Hydra that inhibits BMP activity in zebrafish embryos and acts in Hydra axis formation when new head organizers are formed during budding and regeneration. hychdl transcripts are also up-regulated in the head regeneration-deficient mutant strain reg-16. Accordingly, HyChdl has a function in organizer formation, but not in head differentiation. Our data indicate that the BMP/Chordin antagonism is a basic property of metazoan signaling centers that was invented in early metazoan evolution to set up axial polarity.