A functional screen for gene products that rescue dorsal development in ventralized Xenopus embryos has yielded Xenopus nodal-related 3 (Xnr3), a diverged member of the TGF beta superfamily. Xnr3 is specifically expressed in the Spemann organizer and is only expressed in the epithelial layer of the organizer immediately preceding and extending through gastrulation. Like noggin, Xnr3 can induce muscle in ventral mesoderm explants, consistent with a role in patterning the gastrula. In other ways, the activity of Xnr3 is different from noggin. Embryos receiving injections of Xnr3, particularly in the animal pole, send out tube-like extensions of tissue from the site of injection. These protrusions usually contain no axial mesoderm and only occasionally are positive for neural markers. It has previously been proposed that the epithelial layer of the organizer initiates and coordinates the morphogenetic movements at gastrulation. The protrusions observed may reflect an activity of Xnr3 in promoting morphogenesis.