Cells that express MyoD mRNA, the G8 antigen and the bone morphogenetic protein (BMP) inhibitor noggin (Nog) are present in the epiblast before gastrulation. Ablation of "Myo/Nog" cells in the blastocyst results in an expansion of canonical BMP signaling and prevents the expression of noggin and follistatin before and after the onset of gastrulation. Once eliminated in the epiblast, they are neither replaced nor compensated for as development progresses. Older embryos lacking Myo/Nog cells exhibit severe axial malformations. Although Wnts and Sonic hedgehog are expressed in ablated embryos, skeletal muscle progenitors expressing Pax3 are missing in the somites. Pax3+ cells do emerge adjacent to Wnt3a+ cells in vitro; however, few undergo skeletal myogenesis. Ablation of Myo/Nog cells also results in ectopically placed cardiac progenitors and cardiomyocytes in the somites. Reintroduction of Myo/Nog cells into the epiblast of ablated embryos restores normal patterns of BMP signaling, morphogenesis and skeletal myogenesis, and inhibits the expression of cardiac markers in the somites. This study demonstrates that Myo/Nog cells are essential regulators of BMP signaling in the early epiblast and are indispensable for normal morphogenesis and striated muscle lineage specification.