We report that activin profoundly alters epithelial branching morphogenesis of embryonic mouse salivary gland, pancreas and kidney rudiments in culture, indicating that it may play a role as a morphogen during mammalian organogenesis. In developing pancreas and salivary gland rudiments, activin causes severe disruption of normal lobulation patterns of the epithelium whereas follistatin, an activin-binding protein, counteracts the effect of activin. In the kidney, activin delays branching of the ureter bud and reduces the number of secondary branches. TGF-beta induces a pattern of aberrant branching in the ureter bud derived epithelium distinct from that seen for activin. Reverse-transcriptase polymerase chain reaction, Northern hybridization and in situ hybridization analyses indicate that these developing tissues express the mRNA transcripts for activin subunits, follistatin or activin receptors. Our results are suggestive of a potential role for the activin-follistatin system as an intrinsic regulator of epithelial branching morphogenesis during mammalian organogenesis.