Bone morphogenetic proteins (Bmps) promote ventral specification in both the mesoderm and the ectoderm of vertebrate embryos. Here we identify zebrafish ΔNp63, encoding an isoform of the p53-related protein p63, as an ectoderm-specific direct transcriptional target of Bmp signaling. ΔNp63 itself acts as a transcriptional repressor required for ventral specification in the ectoderm of gastrulating embryos. Loss of ΔNp63 function leads to reduced nonneural ectoderm followed by defects in epidermal development during skin and fin bud formation. In contrast, forced ΔNp63 expression blocks neural development and promotes nonneural development, even in the absence of Bmp signaling. Together, ΔNp63 fulfills the criteria to be the neural repressor postulated by the "neural default model."