Epithelial-mesenchymal interactions are of major importance during development to direct correct differentiation and morphogenesis of embryonic tissues. One subset of lateral mesoderm-derived mesenchymal cells will form the smooth muscle (SM) layer of the primary epithelial lining of hollow internal organs. It has been previously reported that the differentiation of SM cells in Xenopus laevis can be followed by the expression of alpha-SM actin. It was also shown that basic fibroblast growth factor (bFGF) had the ability to induce this actin isoform in isolated blastula animal caps. In this paper, by injection at the two-cell stage of mRNA encoding a truncated form of the FGF receptor which can act as a dominant negative inhibitor, we have analyzed the role of the FGF signaling pathway in the formation of the SM lineage. We have observed that mutated embryos presented significant delay in the differentiation of the SM cells compared to control embryos, demonstrating the importance of this signaling pathway for the formation of the lateral mesoderm-derived SM cells. Moreover, a correlation could be established between this delay and the dramatic defects observed in the morphogenesis of the intestine with which mesenchyme-derived SM cells are normally associated. This phenotype was efficiently rescued by coinjection of the wild-type FGF receptor. Our data suggest that the differentiation of SM cells at the correct time could be an essential event for the proper morphogenesis of the endoderm-derived digestive tract.