Xmi-er1 is an immediate-early gene encoding a transcriptional regulator whose expression is activated by fibroblast growth factor (FGF) during mesoderm induction in Xenopus. In this study, we examined the role of xmi-er1 in embryonic development and mesoderm induction and investigated the importance of various functional domains in the protein sequence. Overexpression of xmi-er1 in embryos resulted in truncations of the anteroposterior axis, with most of the abnormal embryos exhibiting deficiencies in both anterior and posterior structures. Whole mount in situ hybridization for the early mesodermal marker brachyury (Xbra) revealed a dramatic reduction of Xbra expression in xmi-er1-injected embryos, while mesoderm induction assays showed that overexpression of xmi-er1 significantly reduced the percentage of explants induced by FGF-2. Site-directed mutagenesis of several functional domains, including the ELM2 domain, the SANT domain, a putative MEK phosphorylation site, and a proline-rich region showed that only proline 365 in the proline-rich region is required for the effect on embryonic development and mesoderm induction. These data demonstrate that XMI-ER1 is a negative regulator of FGF, perhaps serving to limit the extent of mesoderm formation in vivo, and that this activity is mediated by proline 365. (C) 2003 Elsevier Inc. All rights reserved.