During gastrulation, the three germ layers of the embryo are formed and organized along the anterior-posterior body axis. In the mouse, gastrulation involves the delamination of ectodermal cells through the primitive streak and their differentiation into mesoderm. These processes do not occur in embryos homozygous for a retrovirally induced recessive prenatal lethal mutation, the strain 413-d insertional mutation. Instead of giving rise to mesoderm, embryonic ectoderm in 413-d mutants overproliferates and then rapidly degenerates, although extraembryonic lineages remain viable. Here we isolate a candidate for the mutated gene which encodes a new member of the transforming growth factor-beta (TGF-beta) superfamily. Expression is first detected in primitive streak-stage embryos at about the time of mesoderm formation. It then becomes highly localized in the node at the anterior of the primitive streak. This region is analogous to chick Hensen's node and Xenopus dorsal lip (Spemann's organizer), which can induce secondary body axes when grafted into host embryos (reviewed in refs 5 and 6). Our findings suggest that this gene, named nodal, encodes a signalling molecule essential for mesoderm formation and subsequent organization of axial structures in early mouse development.