Twin-tail goldfish possess a bifurcated caudal axial skeleton. The scarcity of this trait in nature suggests that a rare mutation, which drastically altered the mechanisms underlying axial skeleton formation, may have occurred during goldfish domestication. However, little is known about the molecular development of twin-tail goldfish. Here we show that the bifurcated caudal skeleton arises from a mutation in the chordin gene, which affects embryonic dorsal-ventral (DV) patterning. We demonstrate that formation of the bifurcated caudal axial skeleton requires a stop-codon mutation in one of two recently duplicated chordin genes; this mutation may have occurred within approximately 600 years of domestication. We also report that the ventral tissues of the twin-tail strain are enlarged, and form the embryonic bifurcated fin fold. However, unlike previously described chordin-deficient embryos, this is not accompanied by a reduction in anterior-dorsal neural tissues. These results provide insight into large-scale evolution arising from artificial selection.