Inhibition of the bone morphogenetic proteins (BMPs) is the primary step toward neuroectoderm formation in vertebrates. In this process, the Spemann organizer of the dorsal mesoderm plays a decisive role by secreting several extracellular BMP inhibitors such as Chordin (Chrd). Chrd physically interacts with BMP proteins and inhibits BMP signaling, which triggers the expression of neural-specific transcription factors (TFs), including Foxd4l1.1. Thus, Chrd induces in a BMP-inhibited manner and promotes neuroectoderm formation. However, the regulatory feedback mechanism of Foxd4l1.1 on mesodermal genes expression during germ-layer specification has not been fully elucidated. In this study, we investigated the regulatory mechanism of Foxd4l1.1 on chrd (a mesodermal gene). We demonstrate that Foxd4l1.1 inhibits chrd expression during neuroectoderm formation in two ways: First, Foxd4l1.1 directly binds to FRE (Foxd4l1.1 response elements) within the chrd promoter region to inhibit transcription. Second, Foxd4l1.1 physically interacts with Smad2 and Smad3, and this interaction blocks Smad2 and Smad3 binding to activin response elements (AREs) within the chrd promoter. Site-directed mutagenesis of FRE within the chrd(-2250) promoter completely abolished repressor activity of the Foxd4l1.1. RT-PCR and reporter gene assay results indicate that Foxd4l1.1 strongly inhibits mesoderm- and ectoderm-specific marker genes to maintain neural fate. Altogether, these results suggest that Foxd4l1.1 negatively regulates chrd transcription by dual mechanism. Thus, our study demonstrates the existence of precise reciprocal regulation of chrd transcription during neuroectoderm and mesoderm germ-layer specification in Xenopus embryos.