Little is known of the first transcriptional events that regulate neural fate in response to extracellular signals such as Bmps and Fgfs. Sox3 is one of the earliest transcription factors to be expressed in the developing CNS and has been shown to be regulated by these signalling pathways. We have used both gain- and loss-of-function experiments in zebrafish to elucidate the role of Sox3 in determining neural fate. Ectopic Sox3 caused induction of neural tissue from a very early stage of cell specification in the ectoderm and this effect was maintained such that large domains of additional CNS were apparent, including almost complete duplications of the CNS. Knock-down of Sox3 using morpholinos resulted in a reduction in the size of the CNS, ears and eyes and subsequent inhibition of some aspects of neurogenesis. Our data also suggest that the pro-neural effects of Sox3 can compensate for inhibition of Fgf signalling in inducing neural tissue but it is not sufficient to maintain neural fate, suggesting the presence of Sox3-independent roles of Fgf at later stages.