Signaling interactions between myocardium and endocardium pattern embryonic cardiac regions, instructing their development to fulfill specific functions in the mature heart. We show that ectopic Bmp2 expression in the mouse chamber myocardium changes the transcriptional signature of adjacent chamber endocardial cells into valve tissue, and enables them to undergo epithelial-mesenchyme transition. This induction is independent of valve myocardium specification and requires high levels of Notch1 activity. Biochemical experiments suggest that Bmp2-mediated Notch1 induction is achieved through transcriptional activation of the Notch ligand Jag1, and physical interaction of Smad1/5 with the intracellular domain of the Notch1 receptor. Thus, widespread myocardial Bmp2 and endocardial Notch signaling drive presumptive ventricular endocardium to differentiate into valve endocardium. Understanding the molecular basis of valve development is instrumental to designing therapeutic strategies for congenital heart valve defects.