Dorsoventral patterning of vertebrate and Drosophila embryos requires bone morphogenetic proteins (BMPs) and antagonists of BMP activity. The Drosophila gene tolloid encodes a metalloprotease similar to BMP-1 that interacts genetically with decapentaplegic, the Drosophila homolog of vertebrate BMP-2/4. Zebrafish embryos overexpressing a zebrafish homolog of tolloid were shown to resemble loss-of-function mutations in chordino, the zebrafish homolog of the Xenopus BMP-4 antagonist Chordin. Furthermore, Chordin was degraded by COS cells expressing Tolloid. These data suggest that Tolloid antagonizes Chordin activity by proteolytically cleaving Chordin, A conserved function for zebrafish and Drosophila Tolloid during embryogenesis is proposed.