A network of molecular interactions is required in the developing vertebrate hindbrain for the formation and anterior-posterior patterning of the rhombomeres. FGF signaling is required in this network to upregulate the expression of the Krox20 and Kreisler segmentation genes, but little is known of how FGF gene expression is regulated in the hindbrain. We show that the dynamic expression of FGF3 in chick hindbrain segments and boundaries is similar to that of the BMP antagonist, follistatin. Consistent with a regulatory relationship between BMP signaling and FGF3 expression, we find that an increase in BMP activity due to blocking of follistatin translation by morpholino antisense oligonucleotides or overexpression of BMP results in strong inhibition of FGF3 expression. Conversely, addition of follistatin leads to an increase in the level of FGF3 expression. Furthermore, the segmental inhibition of BMP activity by follistatin is required for the expression of Krox20, Hoxb1 and EphA4 in the hindbrain. In addition, we show that the maintenance of FGF3 gene expression requires FGF activity, suggestive of an autoregulatory loop. These results reveal an antagonistic relationship between BMP activity and FGF3 expression that is required for correct segmental gene expression in the chick hindbrain, in which follistatin enables FGF3 expression by inhibiting BMP activity.