Neural induction is the first fundamental step in nervous system formation. During development, a tightly regulated niche modulates transient extracellular signals to influence neural lineage commitment. To date, however, the cascade of molecular events that sustain these signals in humans is not well understood. Here we show that NPTX1, a secreted protein, is rapidly upregulated during neural induction from human pluripotent stem cells (hPSCs). By manipulating its expression, we were able to reduce or initiate neural lineage commitment. A time-course transcriptome analysis and functional assays show that NPTX1 acts in part by binding the Nodal receptor cofactor TDGF1, reducing both Nodal and BMP signaling. Our findings identify one of the earliest genes expressed upon neural induction and provide insight into human neural lineage specification. Display omitted •NPTX1 is transiently expressed during the early stages of human neural development•Manipulation of NPTX1 levels severely impairs or enhances neural specification•NPTX1 can be used as a predictor of the neural lineage•NPTX1 binds and inhibits TDGF1, and reduces both Nodal and BMP signaling Using human embryonic stem cells as a model system, Fasano and colleagues describe the molecule NPTX1, which directs early human neural development. NPTX1 acts as an inhibitor of the Nodal signaling pathway through its interactions with TDGF1 (a Nodal receptor cofactor) and triggers a cascade of molecular events leading to the establishment of neural cells.