In vertebrates, muscles of the limbs and body wall derive from the lateral compartment of the embryonic somites, and axial muscles derive from the medial compartment. Whereas the mechanisms that direct patterning of somites along the dorsoventral axis are beginning to be understood, little is known about the tissue interactions and signaling molecules that direct somite patterning along the mediolateral axis. We report the identification of a specific marker for the lateral somitic compartment and its early derivativescSim1, an avian homolog of the Drosophila single minded gene. Using this marker, we provide evidence that specification of the lateral somitic lineage results from the antagonistic actions of a diffusible medializing signal from the neural tube and a diffusible lateralizing signal from the lateral plate mesoderm, and we implicate bone morphogenetic protein 4 (BMP4) in directing this lateralization.