The vertebrate caudal proteins, being upstream regulators of the Hox genes, play a role in establishment of the body plan. We describe analysis of two orthologous caudal genes (chick cdx-A and mouse cdx-1) by use of lacZ reporters expressed in transgenic mouse embryos. The expression patterns show many similarities to the expression of endogenous mouse cdx-1. At 8.7 days, cdx/lacZ activity within neurectoderm and mesoderm forms posterior-to-anterior gradients, and we discuss the possibility that similar gradients of cdx gene expression may function as morphogen gradients for the establishment of Hox gene expression boundaries. Our observations suggest that gradients form by decay of cdx/lacZ activity in cells that have moved anterior to the vicinity of the node. The cdx-A/lacZ expression pattern requires an intron enhancer that includes two functional control elements: a DR2-type retinoic acid response element and a Tcf/beta-catenin binding motif. These motifs are structurally conserved in mouse cdx-1.