ABSTRACT We describe the isolation of the Xenopus homeobox gene twin (Xtwn), which was identified in an expression cloning screen for molecules with dorsalizing activities. Injection of synthetic Xtwn mRNA restores a complete dorsal axis in embryos lacking dorsal structures and induces a complete secondary dorsal axis when ectopically expressed in normal embryos. The sequence homology, expression pattern and gain-of-function phenotype of Xtwn is most similar to the previously isolated Xenopus homeobox gene siamois (Xsia) suggesting that Xtwn and Xsia comprise a new subclass of homeobox genes important in dorsal axis specification. We find that Xtwn is able to activate the Spemann organizerspecific gene goosecoid (gsc) via direct binding to a region of the gsc promoter previously shown to mediate Wnt induction. Since Xtwn expression is strongly induced in ectodermal (animal cap) cells in response to overexpression of a dorsalizing Wnt molecule, we examined the possibility that Xtwn might be a direct target of a Wnt signal transduction cascade. First, we demonstrate that purified LEF1 protein can interact, in vitro, with consensus LEF1/TCF3-binding sites found within the Xtwn promoter. Second, these binding sites were shown to be required for Wnt-mediated induction of a Xtwn reporter gene containing these sites. As LEF1/TCF3 family transcription factors have previously been shown to directly mediate Wnt signaling, these results suggest that Xtwn induction by Wnt may be direct. Finally, in UV-hyperventralized embryos, expression of endogenous Xtwn is confined to the vegetal pole and a Xtwn reporter gene is hyperinduced vegetally in a LEF1/TCF3-binding-site-dependent manner. These results suggest that cortical rotation distributes Wnt-like dorsal determinants to the dorsal side of the embryo, including the dorsal marginal zone, and that these determinants may directly establish Spemann’s organizer in this region.