Dorsal-ventral patterning within the ectoderm of the Drosophila embryo requires seven zygotic genes, including short gastrulation (sog). Here we demonstrate that sog, which is expressed in the ventrolateral region of the embryo that gives rise to the nerve cord, is functionally homologous to the chordin gene of Xenopus, which is expressed in the dorsal blastopore lip of the embryo and in dorsal mesoderm, in particular the notochord. We show by injections of messenger RNA that both sog and chordin can promote ventral development in Drosophila, and that sog, like chordin, can promote dorsal development in Xenopus. In Drosophila, sog antagonizes the dorsalizing effects of decapentaplegic (dpp), a member of the transforming growth factor-beta family. One of the dpp homologues in vertebrates, bmp-4, is expressed ventrally in Xenopus and promotes ventral development. We show that dpp can promote ventral fates in Xenopus, and that injection of sog mRNA counteracts the ventralizing effects of dpp. These results suggest the molecular conservation of dorsoventral patterning mechanisms during evolution.