Patterning along the anterior-posterior axis takes place during gastrulation and early neurulation. Homeobox genes like Otx-2 and members of the Hox family have been implicated in this process. The caudal genes in Drosophila and C. elegans have been shown to determine posterior fates. In vertebrates, the caudal genes begin their expression during gastrulation and they take up a posterior position. By injecting sense and antisense RNA of the Xenopus caudal gene Xcad-2, we have studied a number of regulatory interactions among homeobox genes along the anterior-posterior axis. Initially, the Xcad-2 and Otx-2 genes are mutually repressed and, by late gastrulation, they mark the posterior- or anterior-most domains of the embryo, respectively. During late gastrulation and neurulation, Xcad-2 plays an additional regulatory function in relation to the Hox genes. Hox genes normally expressed anteriorly are repressed by Xcad-2 overexpression while those normally expressed posteriorly exhibit more anterior expression. The results show that the caudal genes are part of a posterior determining network which during early gastrulation functions in the subdivision of the embryo into anterior head and trunk domains. Later in gastrulation and neurulation these genes play a role in the patterning of the trunk region.