RNA from goosecoid, a homeobox-containing gene expressed during gastrulation in the anterior mesoderm of vertebrate embryos, can generate organizer activity when injected into ventral mesoderm, resulting in a secondary body axis; it is not yet understood, however, how goosecoid performs its organizer function. We report here that in the zebrafish gastrula, a domain of goosecoid expression arises in presumptive anterior neurectoderm which lies directly above goosecoid-expressing mesendodermal cells. From this position, goosecoid expression then spreads gradually across the ectodermal layer. In cyclops mutant embryos, which lack a ventral anterior brain, expression of goosecoid is abnormal in the mesendoderm and completely absent in the overlying neurectoderm. These results indicate that cyclops is required for correct specification of the mesendoderm and suggest that goosecoid expression in the ectoderm may result from vertical induction from the mesoderm. We propose that in the gastrula head, goosecoid may be important in organizing the ventral neurectoderm.