Dickkopf1 (dkk1) encodes a secreted WNT inhibitor expressed in Spemann's organizer, which has been implicated in head induction in Xenopus. Here we have analyzed the role of dkk1 in endomesoderm specification and neural patterning by gain- and loss-of-function approaches. We find that dkk1, unlike other WNT inhibitors, is able to induce functional prechordal plate, which explains its ability to induce secondary heads with bilateral eyes. This may be due to differential WNT inhibition since dkk1, unlike frzb, inhibits Wnt3a signalling. Injection of inhibitory antiDkk1 antibodies reveals that dkk1 is not only sufficient but also required for prechordal plate formation but not for notochord formation. In the neural plate dkk1 is required for anteroposterior and dorsoventral patterning between mes- and telencephalon, where dkk1 promotes anterior and ventral fates. Both the requirement of anterior explants for dkk1 function and their ability to respond to dkk1 terminate at late gastrula stage. Xenopus embryos posteriorized with bFGF, BMP4 and Smads are rescued by dkk1. dkk1 does not interfere with the ability of bFGF to induce its immediate early target gene Xbra, indicating that its effect is indirect. In contrast, there is cross-talk between BMP and WNT signalling, since induction of BMP target genes is sensitive to WNT inhibitors until the early gastrula stage. Embryos treated with retinoic acid (RA) are not rescued by dkk1 and RA affects the central nervous system (CNS) more posterior than dkk1, suggesting that WNTs and retinoids may act to pattern anterior and posterior CNS, respectively, during gastrulation.