In the current study, we show that bone morphogenetic proteins (BMPs) play a role in hematopoiesis that is independent of their function in specifying ventral mesodermal fate. When BMP activity is upregulated or inhibited in Xenopus embryos hematopoietic precursors are specified properly but few mature erythrocytes are generated. Distinct cellular defects underlie this loss of erythrocytes: inhibition of BMP activity induces erythroid precursors to undergo apoptotic cell death, whereas constitutive activation of BMPs causes an increase in commitment of hematopoietic progenitors to myeloid differentiation and a concomitant decrease in erythrocytes that is not due to enhanced apoptosis. These blood defects are observed even when BMP activity is misregulated solely in non-hematopoietic (ectodermal) cells, demonstrating that BMPs generate extrinsic signals that regulate hematopoiesis independent of mesodermal patterning. Further analysis revealed that endogenous calmodulin-dependent protein kinase IV (CaM KIV) is required to negatively modulate hematopoietic functions of BMPs downstream of receptor activation. Our data are consistent with a model in which CaM KIV inhibits BMP signals by activating a substrate, possibly cAMP-response element-binding protein (CREB), that recruits limiting amounts of CREB binding protein (CBP) away from transcriptional complexes functioning downstream of BMPs.