We investigated the roles of bare morphogenetic protein (BMP), sonic hedgehog (SHH) and fibroblast growth factor (FGF)-expressing signaling centers in regulating the patterned outgrowth of the telencephalic and optic vesicles. Implantation of BMP4 beads in the anterior neuropore of stage 10 chicken embryos repressed FGF8 and SHH expression. Similarly, loss of SHH expression in Shh mutant mice leads to increased BMP signaling and loss of Fgf8 expression in the prosencephalon. Increased BMP signaling and loss of FGF and SHH expression was correlated with decreased proliferation, increased cell death, and hypoplasia of the telencephalic and optic vesicles. However, decreased BMP signaling, through ectopic expression of Noggin, a BMP-binding protein, also caused decreased proliferation and hypoplasia of the telencephalic and optic vesicles, but with maintenance of Fgf8 and Shh expression, and no detectable increase in cell death. These results suggest that optimal growth requires a balance of BMP, FGF8 and SHH signaling. We suggest that the juxtaposition of Fgf8, Bmp4 and Shh expression domains generate patterning centers that coordinate the growth of the telencephalic and optic vesicles, similar to how Fgf8, Bmp4 and Shh regulate growth of the limb bud. Furthermore, these patterning centers regulate regional specification within the forebrain and eye, as exemplified by the regulation of Emx2 expression by different levels of BMP signaling. In summary, we present evidence that there is cross-regulation between BMP-, FGF- and SHH-expressing signaling centers in the prosencephalon which regulate morphogenesis of, and regional specification within, the telencephalic and optic vesicles.