The neural crest is a highly plastic stem cell population that represents an exception to the germ layer theory. Despite being of ectodermal origin, cranial neural crest cells can differentiate into skeletal derivatives typically formed by mesoderm. Here, we report that SMAD2/3-mediated transforming growth factor β (TGF-β) signaling enhances neural crest developmental potential in the chicken embryo. Our results show that TGF-β signaling modulates neural crest axial identity and directly controls the gene circuits that support skeletal differentiation. Cooperation between TGF-β and low levels of WNT signaling in the embryonic head activates cranial-specific cis-regulatory elements. Activation of TGF-β signaling reprogrammed trunk neural crest cells into adopting an anterior identity and led to the development of an improved protocol for the generation of human cranial neural crest cells. Our findings indicate TGF-β signaling is required for the specification of cranial neural crest cells, endowing them with the potential to give rise to the craniofacial skeleton.