BMP-4, a member of the TGF-beta superfamily of growth factors, is involved in various developmental processes. We investigated the effects of BMP-4 and its antagonist Noggin on axolotl trunk development. Implantation of BMP-4-coated microbeads caused inhibition of muscle and dorsal fin formation in the vicinity of the microbeads. At some distance, myotomes developed with reduced height but increased width, which was accompanied by increased cell proliferation. These effects could be modulated by co-implanting Noggin-coated beads. Immunostaining of Pax7 further revealed that although the dermomyotome was absent in the vicinity of BMP-4-coated beads, at some distance from them, it was thicker than in controls, indicating that moderate amounts of BMP-4 stimulate this layer of undifferentiated cells. In contrast, Noggin generally inhibited the dermomyotome, possibly indicating premature differentiation of dermomyotome cells. We conclude that BMP-4 and Noggin are involved in the regulation of cell proliferation and differentiation during somite development.