ABSTRACT The mechanisms by which inductive signals control the identity, proliferation and timing of differentiation of progenitor cells in establishing spatial pattern in developing vertebrate tissues remain poorly understood. We have addressed this issue in the embryonic anterior pituitary, an organ in which distinct hormone cell types are generated in a precise temporal and spatial order from an apparently homogenous ectodermal primordium. We provide evidence that in this tissue the coordinate control of progenitor cell identity, proliferation and differentiation is imposed by spatial and temporal restrictions in FGF- and BMP-mediated signals. These signals derive from adjacent neural and mesenchymal signaling centers: the infundibulum and ventral juxtapituitary mesenchyme. The infundibulum appears to have a dual signaling function, serving initially as a source of BMP4 and subsequently of FGF8. The ventral juxtapituitary mesenchyme appears to serve as a later source of BMP2 and BMP7. In vitro, FGFs promote the proliferation of progenitor cells, prevent their exit from the cell cycle and contribute to the specification of progenitor cell identity. BMPs, in contrast, have no apparent effect on cell proliferation but instead appear to act with FGFs to control the initial selection of thyrotroph and corticotroph progenitor identity.