Loss of mesodermal competence (LMC) during Xenopus development is a well known but little understood phenomenon that prospective ectodermal cells (animal caps) lose their competence for inductive signals, such as activin A, to induce mesodermal genes and tissues after the start of gastrulation. Notch signaling can delay the onset of LMC for activin A in animal caps [Coffman, C.R., Skoglund, P., Harris, W.A., Kintner, C.R., 1993. Expression of an extracellular deletion of Xotch diverts cell fate in Xenopus embryos. Cell 73, 659-671], although the mechanism by which this modulation occurs remains unknown. Here, we show that Notch signaling also delays the onset of LMC in whole embryos, as it did in animal caps. To better understand this effect and the mechanism of LMC itself, we investigated at which step of activin signal transduction pathway the Notch signaling act to affect the timing of the LMC. In our system, ALK4 (activin type I receptor) maintained the ability to phosphorylate the C-terminal region of smad2 upon activin A stimulus after the onset of LMC in both control- and Notch-activated animal caps. However, C-terminal-phosphorylated smad2 could bind to smad4 and accumulate in the nucleus only in Notch-activated animal caps. We conclude that LMC was induced because C-terminal-phosphorylated smad2 lost its ability to bind to smad4, and consequently could not accumulate in the nucleus. Notch signal activation restored the ability of C-terminal-phosphorylated smad2 to bind to smad4, resulting in a delay in the onset of LMC.