The early mammalian embryo is patterned by signals emanating from extraembryonic and embryonic signalling centres, most notably the anterior visceral endoderm (AVE) and the node, respectively. The AVE is responsible for anterior development, whereas further axis specification depends on the node, the equivalent of Spemann's organizer. Formation of the node, at the anterior primitive streak, depends on expression of the transcription factor HNF3beta (ref. 4). However, both the source and the nature of the signals responsible for inducing the node have been unknown. Here we describe a recessive lethal mutation, arkadia, generated using gene-trap mutagenesis. Mutant embryos establish an AVE but fail to maintain anterior embryonic structures and lack a node. The mutation has disrupted the Arkadia gene, which encodes a putative intracellular protein containing a RING domain. Arkadia is essential for HNF3beta expression in the anterior primitive streak. Analysis with chimaeras, however, shows that Arkadia functions within extraembryonic tissues, revealing that these are required to induce the node. Furthermore, our experiments show that Arkadia interacts genetically with the transforming growth factor (TGF)beta-like factor Nodal, implying that Nodal mediates the function of Arkadia in node induction.