During vertebrate mesoderm formation, fates are established according to position in the dorsoventral (D/V) axis of the embryo. Initially, maternal signaling divides nascent mesoderm into axial (dorsal) and non-axial (ventral) domains. Although the subsequent subdivision of non-axial mesoderm into multiple D/V fate domains is known to involve zygotic Wnt8 and BMP signaling as well as the Vent/Vox/Ved family of transcriptional repressors, how levels of signaling activity are translated into differential regulation of fates is not well understood. To address this question, we have analyzed zebrafish embryos lacking Wnt8 and BMP2b. Zebrafish wnt8; swr (bmp2b) double mutants display a progressive loss of non-axial mesoderm and a concomitant expansion of axial mesoderm during gastrulation. Mesoderm induction and specification of the axial domain occur normally in wnt8; swr mutants, but dorsal mesoderm genes eventually come to be expressed throughout the mesoderm, suggesting that the establishment of non-axial mesoderm identity requires continual repression of dorsal mesoderm factors, including repressors of ventral genes. Loss-of-function for Vent, Vox, and Ved phenocopies the wnt8; swr mutant phenotype, consistent with Wnt8 and BMP2b maintaining non-axial mesoderm identity during gastrulation through the regulation of these three transcriptional repressors. We postulate that timely differentiation of the mesoderm requires the maintenance of non-axial mesoderm identity by Wnt8 and BMP2b at the onset of gastrulation followed by subdivision of the non-axial mesoderm into different functional domains during gastrulation.