Sea urchin embryo micromeres form the primary mesenchyme, the skeleton-producing cells of the embryo. Almost nothing is known about nature and timing of the embryonic cues which induce or initiate spicule formation by these cells. A related question concerns the competence of the micromeres to respond to the cues. To examine competence in this system we have exposed cultured sea urchin micromeres to an inducing medium containing horse serum for various periods of time and have identified a period when micromeres are competent to respond to serum and form spicules. This window, between 30 and 50 h after fertilization, corresponds to the time when mesenchyme cells in vivo are aggregating and beginning to form the syncytium in which the spicule will be deposited. The loss of competence after 50 h is not due to impaired cell health since protein synthesis at this time is not significantly different from controls. Likewise the accumulation of a spicule matrix mRNA (SM 50) and a cell surface glycoprotein (msp 130), both indices of micromere/mesenchyme differentiation, still occurs in cells that have lost competence to respond to serum by forming spicules. These experiments demonstrate that the acquisition and loss of competence in these cells are regulated developmental events and establish an in vitro system for the identification of the molecular basis for inductive signal recognition and signal transduction.