The endoderm forms the gut and associated organs, and develops from a layer of cells which emerges during gastrula stages in the vertebrate embryo. In comparison to mesoderm and ectoderm, little is known about the signals which induce the endoderm. The origin of the endoderm is intimately linked with that of mesoderm, both by their position in the embryo, and by the molecules that can induce them. We characterised a gene, zebrafish gata5, which is expressed in the endoderm from blastula stages and show that its transcription is induced by signals originating from the yolk cell. These signals also induce the mesoderm-expressed transcription factor no tail (ntl), whose initial expression coincides with gata5 in the cells closest to the blastoderm margin, then spreads to encompass the germ ring. We have characterised the induction of these genes and show that ectopic expression of activin induces gata5 and ntl in a pattern which mimics the endogenous expression, while expression of a dominant negative activin receptor abolishes ntl and gata5 expression. Injection of RNA encoding a constitutively active activin receptor leads to ectopic expression of gata5 and ntl. gata5 is activated cell-autonomously, whereas ntl is induced in cells distant from those which have received the RNA, showing that although expression of both genes is induced by a TGF-beta signal, expression of ntl then spreads by a relay mechanism. Expression of a fibroblast growth factor (eFGF) or a dominant negatively acting FGF receptor shows that ntl but not gata5 is regulated by FGF signalling, implying that this may be the relay signal leading to the spread of ntl expression. In embryos lacking both squint and cyclops, members of the nodal group of TGF-beta related molecules, gata5 expression in the blastoderm is abolished, making these factors primary candidates for the endogenous TGF-beta signal inducing gata5.