Activin and Vg1, two members of the TGF-beta family, are believed to play roles in mesoderm induction and axis formation in the amphibian embryo. Both molecules are provided maternally, either as protein (activin) or as RNA and protein (Vg1), and experiments with a truncated form of a type IIB activin receptor have led to the conclusion that activin is required for induction of mesoderm in vivo. In this paper we first show that truncated versions of two different Xenopus activin receptors also have severe effects on the activity of the mature region of Vg1, suggesting that such receptors may block the function of several members of the TGF-beta family. We go on to demonstrate that follistatin, a secreted protein which binds activin and blocks its activity, does not interfere with Vg1 signalling. Furthermore, overexpression of follistatin mRNA in Xenopus embryos does not perturb mesoderm formation. Taken together, our data show that the effects of truncated activin receptors on Xenopus development can be explained by the inhibition of Vg1 activity, while the lack of effect of follistatin argues against a function for activin in mesoderm induction.