We identified a__Xenopus__ gene closely related to mammalian bone morphogenetic protein (BMP)‐7 (also termed osteogenic protein‐1 or OP‐1). It resembles the mammalian gene in primary structure and expression pattern much more closely than does a previously described Xenopus homologue, originally termed XBMP‐7 [Nishimatsu, Suzuki, Shoda, Murakami and Ueno (1992) Biochem. Biophys. Res. Commun. 186, 1487–1495]. The novel gene has therefore been designated XBMP‐7 and the gene described earlier has been renamed XBMP‐7R (M. Moos and N. Ueno, unpublished work). It has a broad distribution, primarily in the anterior and posterior ventral regions during gastrulation, subsequently becoming prominent at different stages in a wide variety of structures (eyes, neural structures, heart, pronephros, posterior ventral region and other structures), paralleling the distribution of XBMP‐4 closely. However, its expression begins later than that of XBMP‐4 during gastrulation. Lithium treatment of embryos concentrates the XBMP‐7 expression in the expanded eye and heart structures. Ventral overexpression of XBMP‐7 produces large protrusions that ultimately develop colouration characteristic of haemoglobin, which is confirmed by markedly expanded expression of α‐globin. Dorsal overexpression suppresses dorsal anterior structures. Molecular analysis of animal caps overexpressing XBMP‐7 reveals induction of markers associated with ventral and haematopoietic tissue, which is consistent with whole‐embryo overexpression results. Globin induction by XBMP‐7 can be blocked by a truncated BMP receptor previously shown to interrupt BMP‐4 signalling, indicating XBMP‐7 also interacts with this receptor. Our data support the concept that XBMP‐7 may play a variety of roles during embryogenesis, and suggest a possible role in haematogenesis.