Bone Morphogenetic Proteins (BMPs) pattern the dorsal-ventral axis of bilaterian embryos; however, their roles in the evolution of body plan are largely unknown. We examined their functional evolution in fly embryos. BMP signaling specifies two extraembryonic tissues, the serosa and amnion, in basal-branching flies such as Megaselia abdita, but only one, the amnioserosa, in Drosophila melanogaster. The BMP signaling dynamics are similar in both species until the beginning of gastrulation, when BMP signaling broadens and intensifies at the edge of the germ rudiment in Megaselia, while remaining static in Drosophila. Here we show that the differences in gradient dynamics and tissue specification result from evolutionary changes in the gene regulatory network that controls the activity of a positive feedback circuit on BMP signaling, involving the tumor necrosis factor alpha homolog eiger. These data illustrate an evolutionary mechanism by which spatiotemporal changes in morphogen gradients can guide tissue complexity.