Smad2 and Smad3, two essential nuclear effectors of transforming growth factor (Tgf)-beta signals, have been found to be implicated in mesoderm and endoderm development in vertebrate embryos. However, their roles in the induction and patterning of the neuroectoderm are not well established. In this study, we show that interference with Smad2/3 activities in zebrafish embryos, by injecting dnsmad3b mRNA encoding a dominant negative Smad3b mutant, inhibits the expression of the early neural markers sox2 and sox3 at the onset of gastrulation and results in reduction of the anterior neuroectodermal marker otx2 as well as the posterior neuroectodermal marker hoxb1b during late gastrulation, suggesting a role of Smad2/3 activities in neural induction. Conversely, excess Smad2/3 activities, caused by injecting smad3b mRNA, lead to an enhancement of sox2 and sox3 expression in the ventral domains but an inhibition of their expression in the dorsalmost region at early stages. Overexpression of smad3b also causes ventral expansion of the otx2 and hoxb1b expression domains accompanied with rostral shift of the hoxb1b domain at late gastrulation stages. Collectively, these data indicate that Smad2/3 activities are required for neural induction and neuroectodermal posteriorization in zebrafish. Knockdown of chordin partially inhibits effect of smad3b overexpression on neural induction, implying that Smad2/3 exert their effect on neural induction in part by regulating the expression of Bmp antagonists. Furthermore, down-regulation or up-regulation of Smad2/3 activities in MZoep mutant embryos, which lack the organizer and mesendodermal tissues due to deficiency of Nodal signaling, still affects induction and patterning of the neuroectoderm, suggesting that Smad2/3 activities are implicated in neural development in the absence of the organizer and mesendodermal tissues. We additionally demonstrate that Smad2/3 activities cooperate with Wnt and Fgf signals in neural development. Thus, Smad2/3 activities play important roles not only in mesendodermal development but also in neural development during early vertebrate embryogenesis.