LEF1/TCFs are high mobility group box-containing transcriptional factors mediating canonical Wnt/beta-catenin signaling during early embryogenesis and tumorigenesis. Beta-catenin forms a complex with LEF1/TCFs and transactivates LEF1/TCF-mediated transcriptions during dorsalization. Although LEF-mediated transcription is also implicated in ventralization, the underlying molecular mechanism is not well understood. Using the vertebrate Xenopus laevis model system, we found that Xom, which is a ventralizing homeobox protein with dual roles of transcriptional activation and repression, forms a complex with LEF1/TCF through its homeodomain and transactivates LEF1/TCF-mediated transcription through its N-terminal transactivation domain (TAD). Our data show that Xom lacking the N-terminal TAD fails to transactivate ventral genes, such as BMP4 and Xom itself, but retains the ability to suppress transcriptional activation of dorsal gene promoters, such as the Goosecoid promoter, indicating that transactivation and repression are separable functions of Xom. It has been postulated that Xom forms a positive re-enforcement loop with BMP4 to promote ventralization and to suppress dorsal gene expression. Consistent with an essential role of Xom transactivation of LEF1/TCFs during early embryogenesis, we found that expression of the dominant-negative Xom mutant that lacks the TAD fails to re-enforce the ventral signaling of BMP4 and causes a catastrophic effect during gastrulation. Our data suggest that the functional interaction of Xom and LEF1/TCF-factors is essential for ventral cell fate determination and that LEF1/TCF factors may function as a point of convergence to mediate the combined signaling of Wnt/beta-catenin and BMP4/Xom pathways during early embryogenesis.