Signaling via bone morphogenetic proteins (BMPs) regulates a vast array of diverse biological processes in the developing embryo and in postembryonic life. Many insights into BMP signaling derive from studies of the BMP signaling gradients that pattern cell fates along the embryonic dorsal–ventral (DV) axis of both vertebrates and invertebrates. This review examines recent developments in the field of DV patterning by BMP signaling, focusing on extracellular modulation as a key mechanism in the formation of BMP signaling gradients in Drosophila, Xenopus, and zebrafish. Birth Defects Research (Part C) 78:224–242, 2006. © 2006 Wiley‐Liss, Inc.