At fourth cleavage of sea urchin embryos four micromeres at the vegetal pole separate from four macromeres just above them in an unequal cleavage. The micromeres have the capacity to induce a second axis if transplanted to the animal pole and the absence of micromeres at the vegetal pole results in the failure of macromere progeny to specify secondary mesenchyme cells (SMCs). This suggests that micromeres have the capacity to induce SMCs. We demonstrate that micromeres require nuclear beta-catenin to exhibit SMC induction activity. Transplantation studies show that much of the vegetal hemisphere is competent to receive the induction signal. The micromeres induce SMCs, most likely through direct contact with macromere progeny, or at most a cell diameter away. The induction is quantitative in that more SMCs are induced by four micromeres than by one. Temporal studies show that the induction signal is passed from the micromeres to macromere progeny between the eighth and tenth cleavage. If micromeres are removed from hosts at the fourth cleavage, SMC induction in hosts is rescued if they later receive transplanted micromeres between the eighth and tenth cleavage. After the tenth cleavage addition of induction-competent micromeres to micromereless embryos fails to specify SMCs. For macromere progeny to be competent to receive the micromere induction signal, beta-catenin must enter macromere nuclei. The macromere progeny receive the micromere induction signal through the Notch receptor. Signaling-competent micromeres fail to induce SMCs if macromeres express dominant-negative Notch. Expression of an activated Notch construct in macromeres rescues SMC specification in the absence of induction-competent micromeres. These data are consistent with a model whereby beta-catenin enters the nuclei of micromeres and, as a consequence, the micromeres produce an inductive ligand. Between the eighth and tenth cleavage micromeres induce SMCs through Notch. In order to be receptive to the micromere inductive signal the macromeres first must transport beta-catenin to their nuclei, and as one consequence the Notch pathway becomes competent to receive the micromere induction signal, and to transduce that signal. As Notch is maternally expressed in macromeres, additional components must be downstream of nuclear beta-catenin in macromeres for these cells to receive and transduce the micromere induction signal.