TGFβ signaling positions the ciliary band and patterns neurons in the sea urchin embryo.  The ciliary band is a distinct region of embryonic ectoderm that is specified between oral and aboral ectoderm. Flask-shaped ciliary cells and neurons differentiate in this region and they are patterned to form an integrated tissue that functions as the principal swimming and feeding organ of the larva. TGFβ signaling, which is known to mediate oral and aboral patterning of the ectoderm, has been implicated in ciliary band formation. We have used morpholino knockdown and ectopic expression of RNA to alter TGFβ signaling at the level of ligands, receptors, and signal transduction components and assessed the differentiation and patterning of the ciliary band cells and associated neurons. We propose that the primary effects of these signals are to position the ciliary cells, which in turn support neural differentiation. We show that Nodal signaling, which is known to be localized by Lefty, positions the oral margin of the ciliary band. Signaling from BMP through Alk3/6, affects the position of the oral and aboral margins of the ciliary band. Since both Nodal and BMP signaling produce ectoderm that does not support neurogenesis, we propose that formation of a ciliary band requires protection from these signals. Expression of BMP2/4 and Nodal suppress neural differentiation. However, the response to receptor knockdown or dominant-negative forms of signal transduction components indicate signaling is not acting directly on unspecified ectoderm cells to prevent their differentiation as neurons. Instead, it produces a restricted field of ciliary band cells that supports neurogenesis. We propose a model that incorporates spatially regulated control of Nodal and BMP signaling to determine the position and differentiation of the ciliary band, and subsequent neural patterning.