Abstract TGF-β signaling plays a key role in induction of the Xenopus mesoderm and endoderm. Using a yeast-based selection scheme, we isolated derrière, a novel TGF-β family member that is closely related to Vg1 and that is required for normal mesodermal patterning, particularly in posterior regions of the embryo. Unlike Vg1, derrière is expressed zygotically, with RNA localized to the future endoderm and mesoderm by late blastula, and to the posterior mesoderm by mid-gastrula. The derrière expression pattern appears to be identical to the zygotic expression domain of VegT (Xombi, Brat, Antipodean), and can be activated by VegT as well as fibroblast growth factor (FGF). In turn, derrière activates expression of itself, VegT and eFGF, suggesting that a regulatory loop exists between these genes. derrière is a potent mesoderm and endoderm inducer, acting in a dose-dependent fashion. When misexpressed ventrally, derrière induces a secondary axis lacking a head, an effect that is due to dorsalization of the ventral marginal zone. When misexpressed dorsally, derrière suppresses head formation. derrière can also posteriorize neurectoderm, but appears to do so indirectly. Together, these data suggest that derrière expression is compatible only with posterior fates. In order to assess the in vivo function of derrière, we constructed a dominant interfering Derrière protein (Cm-Derrière), which preferentially blocks Derrière activity relative to that of other TGFβ family members. Cm-derrière expression in embryos leads to posterior truncation, including defects in blastopore lip formation, gastrulation and neural tube closure. Normal expression of anterior and hindbrain markers is observed; however, paraxial mesodermal gene expression is ablated. This phenotype can be rescued by wild-type derrière and by VegT. Our findings indicate that derrière plays a crucial role in mesodermal patterning and development of posterior regions in Xenopus.