The vertebrate tailbud and trunk form very similar tissues. It has been a controversial question for decades whether cell determination in the developing tail proceeds as part of early axial development or whether it proceeds by a different mechanism. To examine this question more closely, we have used photoactivation of fluorescence to mark small neighborhoods of cells in the developing tailbud of Xenopus laevis. We show that, in one region of the tailbud, very small groups of adjacent cells can contribute progeny to the neural tube, notochord and somitic muscle, as well as other identified cell types within a single embryo. Groups averaging three adjacent cells at a later stage can contribute progeny with a similar distribution. Our data suggest that the tailbud contains multipotent cells that make very late germ-layer decisions.