Bone morphogenetic protein 4 (BMP4) is known to regulate dorsoventral patterning, limb bud formation and axis specification in many organisms, including the chicken. In the chick developing inner ear, BMP4 expression becomes localized in two cell clusters at the anterior and posterior edges of the otic epithelium beginning at stage 16/17 and is expressed in presumptive sensory tissue at later stages. This restricted spatiotemporal pattern of expression occurs just prior to the otocyst's transition to a more complex three-dimensional structure. To further analyze the role of BMP4 in avian otic morphogenesis, cells expressing BMP4 or its antagonist, noggin, were grown on agarose beads and implanted into the periotic mesenchyme surrounding the chick otocyst. Although the BMP4-producing cells had no effect on the mature inner ear structure when implanted alone, noggin-producing cells implanted adjacent to the BMP4 cell foci prevented normal semicircular canal development. Beads implanted at the anterior BMP4 focus eliminated the anterior and/or the horizontal canals. Noggin cells implanted at the posterior focus eliminated the posterior canal. Canal loss was prevented by co-implantation of BMP4 cell beads next to noggin beads. An antibody to the chick hair cell antigen (HCA) was used to examine sensory cell distribution, which was abnormal only in the affected tissues of noggin-exposed inner ears. These data suggest a role for BMP4 in the accurate and complete morphological development of the semicircular canals.