The mechanisms regulating nervous system development are still unknown for a wide variety of taxa. In insects and vertebrates, bone morphogenetic protein (BMP) signaling is known to play a key role in both neural specification and dorsal-ventral (D-V) axis formation, leading to speculation about the conserved evolution of nervous systems. Studies outside insects and vertebrates show a more diverse picture of what, if any role, BMP signaling plays in neural development across Bilateria. This is especially true in the morphologically diverse Spiralia (~Lophotrochozoa). Despite several studies of D-V axis formation and neural induction in spiralians, there is no consensus for how these two processes are related, or whether BMP signaling may have played an ancestral role in either process. Here we incubated larvae of the sedentary annelid Capitella teleta in BMP4 protein at various cleavage stages to determine the role of BMP signaling during early development. Adding exogenous BMP protein to early-cleaving C. teleta embryos had a striking effect on formation of the brain, eyes, and foregut in a time-dependent manner. However, adding BMP did not block neural specification of the brain or VNC or block formation of the D-V axis. We identified three key time windows of BMP activity, and hypothesize that BMP may cause trans-fate switching of blastomere quadrant identities in at least one time window. 1. Early treatment around 2q caused the loss of the eyes, radialization of the brain, and a reduction of the foregut, which we interpret as a loss of A-, B- and C-quadrant identities with a possible trans-fate switch to a D-quadrant identity. 2. Treatment after 4q induced formation of a third ectopic brain lobe, eye, and foregut lobe, which we interpret as a trans-fate switch of B-quadrant micromeres to a C-quadrant identity. 3. Continuous BMP treatment from early cleavage through mid-larval stages resulted in a modest expansion of Ct-chrdl expression in the dorsal ectoderm and a concomitant loss of the ventral midline (neurotroch ciliary band). Loss of the ventral midline was accompanied by a collapse of the bilaterally-symmetric VNC although the total amount of neural tissue did not appear to be greatly affected. Our results compared to those from other annelids and molluscs suggest that BMP signaling was not ancestrally involved in delimiting neural tissue or establishing the D-V axis in the last common ancestor of annelids. However, the effects of ectopic BMP on quadrant-identity during cleavage stages may represent a very early ‘organizing’ function in the context of spiralian development. Ultimately, studies on a wider range of spiralian taxa are needed to determine if the ability of BMP signaling to block neural induction and help establish the D-V axis was lost within Annelida or if BMP signaling gained these functions multiple times across Bilateria. Ultimately, these comparisons will give us insight into the evolutionary origins of centralized nervous systems and body plans.