Fibroblast growth factor (FGF) is established as an initiator of signaling events critical for neurogenesis and mesoderm formation during early Xenopus embryogenesis. However, less is known about the role FGF signaling plays in endoderm specification. Here, we show for the first time that endoderm-specific genes are induced when FGF signaling is blocked in animal cap explants. This block of FGF signaling is also responsible for a significant enhancement of endodermal gene expression in animal cap explants that are injected with a dominant-negative BMP-4 receptor (DNBR) RNA or treated with activin, however, neural and mesoderm gene expression is diminished. Consistent with these results, the injection of dominant-negative FGF receptor (DNFR) RNA expands endodermal cell fate boundaries while FGF treatment dramatically reduces endoderm in whole embryos. Taken together, these results indicate that inhibition of FGF signaling promotes endoderm formation, whereas the presence of active FGF signaling is necessary for neurogenesis/mesoderm formation. (C) 2004 Elsevier Inc. All rights reserved.