We report an analysis of the tissue and molecular interplay involved in the early specification of the forebrain, and in particular telencephalic, regions of the Xenopus embryo. In dissection/recombination experiments, different parts of the organizer region were explanted at gastrula stage and tested for their inducing/patterning activities on either naive ectoderm or on midgastrula stage dorsal ectoderm. We show that the anterior dorsal mesendoderm of the organizer region has a weak neural inducing activity compared with the presumptive anterior notochord, but is able to pattern either neuralized stage 10.5 dorsal ectoderm or animal caps injected with BMP inhibitors to a dorsal telencephalic fate. Furthermore, we found that a subset of this tissue, the anterior dorsal endoderm, still retains this patterning activity. At least part of the dorsal telencephalic inducing activities may be reproduced by the anterior endoderm secreted molecule cerberus, but not by simple BMP inhibition, and requires the N-terminal region of cerberus that includes its Wnt-binding domain. Furthermore, we show that FGF action is both necessary and sufficient for ventral forebrain marker expression in neuralized animal caps, and possibly also required for dorsal telencephalic specification. Therefore, integration of organizer secreted molecules and of FGF, may account for patterning of the more rostral part of Xenopus CNS.