Wnt signalling plays a critical role in both initiating and patterning of the anterior-posterior axis during development. Wnts exert their biological effects, in part, by activating specific target genes through members of the TCF/LEF family of transcription factors. To gain new insight into the role of T-cell factors (or Tcf's) during development, we analysed Tcf4 and Tcf1 compound null embryos. These mutants showed severe caudal truncations, as well as duplications of the neural tube. Unlike other mutations affecting Wnt signalling, paraxial mesoderm formation was not impaired and early caudal markers, such as T, were unaffected. Analysis of endodermal markers uncovered early and specific defects in hindgut expansion, and later an anterior transformation of the gastro-intestinal tract. Our results reveal a novel role for Wnt signalling in early gut morphogenesis and suggest that specific Wnt-driven patterning events are determined by the unique tissue distribution of Tcf/Lef family members.