An RNA localized to the vegetal cortex of Xenopus oocytes encodes a novel T-box protein (VegT) capable of inducing either dorsal or posterior ventral mesoderm at different times in development. VegT is a nuclear protein and its C-terminal domain can activate transcription in a yeast reporter assay, observations consistent with VegT functioning as a transcription factor. Zygotic expression is dynamic along the dorsoventral axis, with transcripts first expressed in the dorsal marginal zone. By the end of gastrulation, VegT is expressed exclusively in posterior ventral and lateral mesoderm and is excluded from the notochord. Later expression is confined to a subset of Rohon-Beard cells, a type of primary sensory neuron. In animal cap assays, VegT is capable of converting prospective ectoderm into ventral lateral mesoderm. Such ectopic expression of VegT induces its own expression as well as that of Xwnt-8 in caps, suggesting that a Wnt pathway may be involved. Mis-expression of VegT in dorsal animal blastomeres fated to contribute to brain suppresses head formation. Our results suggest that VegT is a localized transcription factor, which operates sequentially in several developmental pathways during embryogenesis, including dorsoventral and posterior patterning of mesoderm.