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Previously, we showed that Xenopus nodal-related factors (Xnrs) can act as mesoderm inducers, and that activin induces Xnr transcription, suggesting that Xnrs relay or maintain induction processes initiated by activin-like molecules. We used a dominant negative cleavage mutant Xnr2 (cmXnr2) to carry out loss-of-function experiments to explore the requirement for Xnr signaling in early amphibian embryogenesis, and the relationship between activin and Xnrs. cmXnr2 blocked mesoderm induction caused by Xnr, but not activin, RNA. In contrast, cmXnr2 did suppress mesoderm and endoderm induction by activin protein, while Xnr transcript induction was unaffected by cmXnr2, consistent with an interference with the function of Xnr peptides that were induced by activin protein treatment. The severe hyperdorsalization and gastrulation defects caused by Xnr2 in whole embryos were rescued by cmXnr2, establishing a specific antagonistic relationship between the normal and cleavage mutant proteins. Expression of cmXnr2 resulted in delayed dorsal lip formation and a range of anterior truncations that were associated with delayed and suppressed expression of markers for dorsoanterior endoderm, in which the recently recognized head organizer activity resides. Reciprocally, Xnr2 induced dorsoanterior endodermal markers, such as cerberus, Xhex-1 and Frzb, in animal cap ectoderm. The migratory behavior of head mesendoderm explanted from cmXnr2 RNA-injected embryos was drastically reduced. These results indicate that Xnrs play crucial roles in initiating gastrulation, probably by acting downstream of an activin-like signaling pathway that leads to dorsal mesendodermal specification, including setting up the head organizer.