Analysis of early development of the head of the Australian lungfish Neoceratodus forsteri indicates that no mesenchyme cells in this species enter the embryo as neurectoderm cells, originally positioned between presumptive ectoderm and primordial neural tissue of the embryo. Neural tissue in N. forsteri forms initially as a plate of columnar cells, flanked by raised folds of ectoderm, that sinks below the level of the ectoderm and forms a deep trough. Neural tissue separates from ectoderm, and fuses below the ectoderm to form a neural tube with cells arranged around a small central cavity. Subsequently, ectoderm unites to form a complete cover over the neural tissue. No migrating cells leave the ectodermal–neural junction during this process. No unsegmented column of cells appears dorsal to the neural tissue, before migration, as in teleosts and lampreys of equivalent stages. Neuromeres and tracts of cells leaving the central nervous tissues can be demonstrated in the developing neurula, but these are derived from neural tissue alone and appear after the formation of the neural keel is complete and neural structures have begun to develop. Mesenchyme cells are already present in large numbers, and are apparently derived from enterotomy or enter the embryo by involution at the blastopore. This finding explains previous experimental results in embryos of N. forsteri, which demonstrated that removal of cells from the margin of the neural folds, where higher vertebrate neural crest cells appear, apparently has little influence on the development of pigment cells or of skeletal and dental structures of the head.