Ventral structures in the central nervous system are patterned by signals emanating from the underlying mesoderm as well as originating within the neuroectoderm. Mutations in the zebrafish, Danio rerio, are proving instrumental in dissecting these midline signals. The cyclops mutation leads to a loss of medial floor plate and to severe deficits in ventral forebrain development, leading to cyclopia. Here, we report that the cyclops locus encodes the nodal-related protein Ndr2, a member of the transforming growth factor type beta superfamily of factors. The evidence includes identification of a missense mutation in the initiation codon and rescue of the cyclops phenotype by expression of ndr2 RNA, here renamed "cyclops." Thus, in interaction with other molecules implicated in these processes such as sonic hedgehog and one-eyed-pinhead, cyclops is required for ventral midline patterning of the embryonic central nervous system.