We have identified a novel homeobox gene, Xvent-1, that is differentially expressed in the ventral marginal zone of the early Xenopus gastrula. Evidence is presented from mRNA microinjection experiments for a role for this gene in dorsoventral patterning of mesoderm. First, Xvent-1 is induced by BMP-4, a gene known to be a key regulator of ventral mesoderm development. Second, Xvent-1 and the organizer-specific gene goosecoid are able to interact, directly or indirectly, in a cross-regulatory loop suppressing each other's expression, consistent with their mutually exclusive expression in the marginal zone. Third, microinjection of Xvent-1 mRNA ventralizes dorsal mesoderm. The results suggest that Xvent-1 functions in a ventral signaling pathway that maintains the ventral mesodermal state and antagonizes the Spemann organizer.