The Xenopus homeobox gene Xhox3 shows a graded expression in the axial mesoderm, with the highest concentration in the posterior end of frog gastrula and neurula embryos. To investigate the function of the Xhox3 gene, synthetic Xhox3 mRNA was injected into different regions of developing embryos. In particular, Xhox3 was supplied in excess to anterior cells, which normally have the lowest levels of Xhox3 RNA. The results show that injection of Xhox3, but not control, mRNA into prospective anterior regions of developing embryos produces a series of graded axial defects. The injected embryos gastrulate normally but fail to form anterior (head) structures. Our findings suggest that Xhox3 is involved in establishing anterior-posterior cell identities during pattern formation of the axial mesoderm in early embryonic development.