Signaling factors of the Wnt proto-oncogene family are implicated in dorsal axis formation during vertebrate development, but the molecular mechanism of this process is not known. Studies in Drosophila have indicated that the dishevelled gene product is required for wingless (Wnt1 homolog) signal transduction. We demonstrate that injection of mRNA encoding a Xenopus homolog of dishevelled (Xdsh) into prospective ventral mesodermal cells triggers a complete dorsal axis formation in Xenopus embryos. Lineage tracing experiments show that cells derived from the injected blastomere contribute to anterior and dorsal structures of the induced axis. In contrast to its effect on mesoderm, overexpression of Xdsh mRNA in prospective ectodermal cells triggers anterior neural tissue differentiation. These studies suggest that Wnt signal transduction pathway is conserved between Drosophila and vertebrates and point to a role for maternal Xdsh product in dorsal axis formation and in neural induction.