The TGFbeta family member Nodal has been shown to be involved in a variety of processes in development, including early axis formation. Here, we use a conditional gene inactivation strategy to show a specific requirement for Nodal in the epiblast. Complete inactivation of the Nodal locus in the epiblast using the Sox2-Cre deleter strain results in a failure to establish global anterior-posterior patterning, a phenotype that resembles the Nodal null phenotype. By contrast, mosaic inactivation of Nodal in the epiblast using the Mox2-Cre (MORE) deleter strain affects formation of the anterior mesendoderm and subsequent anterior neurectoderm patterning. Furthermore, ES cell chimera experiments indicate that Nodal-deficient ES cells preferentially populate the anterior compartment of the epiblast, suggesting that cell mixing in the epiblast is not random and that Nodal signaling mediates a novel anterior-posterior cell-sorting process within the epiblast before gastrulation.