Zebrafish eve1, a member of the even-skipped related gene family, is expressed initially in the animal pole of late blastula embryo and subsequently restricted to the ventral mesoderm of the gastrula embryo under the signaling control of bone morphogenetic protein (Bmp). Overexpression of eve1 in embryos results in similar ventralized phenotypes to that seen in embryos overexpressing Bmp, suggesting that Eve1 acts downstream of the Bmp signaling pathway to regulate the fate of mesodermal progenitor cells (MPCs). How eve1 functions in the normal development of MPCs is unknown. Using overexpression of a chimeric protein of Eve1 fused to the Gal4 activation domain and gene-knockdown approaches, we investigated the role of eve1 in MPC development of zebrafish embryos at early gastrulation. We find that Eve1 functions as a transcriptional repressor and is required for normal MPC development. The role of eve1 in MPCs requires the redundant and cooperative functions of Bmp-activated downstream homeobox genes, ved, vent and vox. Inhibition of eve1, ved, vent and vox in double and triple combinations results in dorsalized phenotypes. Furthermore, specific inhibition of eve1 and ved causes the expression of an ectopic patch of the brachyury ortholog no tail and leads to the formation of an ectopic tail. Our data show that Eve1 functions together with Ved, Vent and Vox in a transcriptional network to prevent the spread of anti-Bmp gene activity from the dorsal side, leading to the establishment of the Bmp gradient activity along the dorsoventral axis to induce distinct transcriptional outputs in MPCs to maintain the lateral and ventral MPC fates during gastrulation.