Peptide growth factors may play a role in patterning of the early embryo, particularly in the induction of mesoderm. We have explored the role of fibroblast growth factor (FGF) in early Xenopus development by expressing a dominant negative mutant form of the FGF receptor. Using a functional assay in frog oocytes, we found that a truncated form of the receptor effectively abolished wild-type receptor function. Explants from embryos expressing this dominant negative mutant failed to induce mesoderm in response to FGF. In whole embryos the mutant receptor caused specific defects in gastrulation and in posterior development, and overexpression of a wild-type receptor could rescue these developmental defects. These results demonstrate that the FGF signaling pathway plays an important role in early embryogenesis, particularly in the formation of the posterior and lateral mesoderm.