The Spemann-Mangold organizer is required in amphibian embryos to coordinate cell fate specification, differentiation of dorsal cell types and morphogenetic movements at early stages of development. A great number of genes are specifically expressed within the organizer, most of them encoding secreted proteins and transcription factors. The challenge is now to uncover genetic cascades and networks of interactions between these genes, in order to understand how the organizer functions. The task is immense and requires loss-of-function approaches to test the requirement for a given factor in a specific process. For transcription factors, it is possible to generate inhibitory molecules by fusing the DNA binding region to a repressor or activator domain, which should in principle antagonize the activity of the endogenous protein at the level of the DNA targets. We used this strategy to design activated and inhibitory forms of the LIM homeodomain transcription factor Lim1, which is encoded by an organizer gene involved in head development, as revealed by analyses of knockout mice. We found that Lim1 is a transcriptional activator, and can trigger dorso-anterior development upon ventral expression of hyperactive forms, in which Ldb1 is fused to Lim1. Using inhibitory Lim1 fusion proteins, we found that Lim1, or genes closely related to it, is required for head formation as well as for notochord development. Co-expression experiments revealed that Lim1 is required downstream of the early organizer factor Siamois, first, to establish the genetic program of the organizer and second, to mediate the action of organizer agents that are responsible for blocking ventralizing activities in the gastrula.