Long-chain polyunsaturated fatty acids (LC-PUFA) and their metabolites are critical players in cell biology and embryonic development. Here we show that long-chain acyl-CoA synthetase 4a (Acsl4a), an LC-PUFA activating enzyme, is essential for proper patterning of the zebrafish dorsoventral axis. Loss of Acsl4a results in dorsalized embryos due to attenuated bone morphogenetic protein (Bmp) signaling. We demonstrate that Acsl4a modulates the activity of Smad transcription factors, the downstream mediators of Bmp signaling. Acsl4a promotes the inhibition of p38 mitogen-activated protein kinase and the Akt-mediated inhibition of glycogen synthase kinase 3, critical inhibitors of Smad activity. Consequently, introduction of a constitutively active Akt can rescue the dorsalized phenotype of Acsl4a-deficient embryos. Our results reveal a critical role for Acsl4a in modulating Bmp-Smad activity and provide a potential avenue for LC-PUFAs to influence a variety of developmental processes.