Examples of lateral asymmetry are often found in vertebrates, such as the heart being on the left side, but the molecular mechanism governing the establishment of this left-right (L-R) handedness is unknown. A diffusible morphogen may determine L-R polarity, but a likely molecule has not so far been identified. Here we report on the gene lefty, a member of the transforming growth factor-beta family, which may encode a morphogen for L-R determination. Lefty protein contains the cysteine-knot motif characteristic of this superfamily and is secreted as a processed form of relative molecular mass 25K-32K. Surprisingly, lefty is expressed in the left half of gastrulating mouse embryos. This asymmetric expression is very transient and occurs just before the first sign of lateral asymmetry appears. In the mouse mutants iv and inv, which cause situs inversus, the sites of lefty expression are inverted, indicating that lefty is downstream of iv and inv. These results suggest that lefty may be involved in setting up L-R asymmetry in the organ systems of mammals.