Osteogenic Protein-1 (OP-1/BMP-7) is a bone morphogenetic protein in the transforming growth factor-beta superfamily and has been shown to be expressed temporally and spatially during epithelial-mesenchymal interactions mediating tissue morphogenesis in early embryogenesis. In order to identify the primary role(s) for OP-1 in development, we carried out whole rat embryo cultures, over a 72-h period from primitive streak stages to early limb bud stages, in rat sera containing either OP-1 blocking antibodies (10 micrograms/ml) or nonreactive IgG. Rat embryos cultured with control antibodies developed normally, while those cultured with anti-OP-1 antibodies consistently exhibited over-all reduced size and absence of eyes. Histological sections revealed a greater reduction in neural retina development in the embryos treated with anti-OP-1 blocking antibodies. In situ hybridization and immunolocalization analyses indicate that OP-1 is expressed in the neuroepithelium of the optic vesicle at E11.5, is limited to the presumptive neural retina and developing lens placode, and is subsequently expressed in the neural retina, lens and developing cornea at E12.5-E13.5. Our results indicate that OP-1 mediates the inductive signals involved in mammalian eye development.