In the early Drosophila embryo, BMP-type ligands act as morphogens to suppress neural induction and to specify the formation of dorsal ectoderm and amnioserosa. Likewise, during pupal wing development, BMPs help to specify vein versus intervein cell fate. Here, we review recent data suggesting that these two processes use a related set of extracellular factors, positive feedback, and BMP heterodimer formation to achieve peak levels of signaling in spatially restricted patterns. Because these signaling pathway components are all conserved, these observations should shed light on how BMP signaling is modulated in vertebrate development.