The formation of the anterior visceral endoderm (AVE) in the pre-gastrulation mouse embryo represents a crucial event in patterning of the anterior-posterior axis. Here, we show that the transforming growth factorβ (Tgfβ) family member Gdf3 (growth-differentiation factor 3), a close relative of Xenopus Vg1, resembles the Tgfβ ligand Nodal in both its signaling activity and its role in AVE formation in vivo. Thus, in cell culture, Gdf3 signaling requires the EGF-CFC co-receptor Cripto and can be inhibited by Lefty antagonists. In Xenopus embryos, Gdf3 misexpression results in secondary axis formation, and induces morphogenetic elongation and mesendoderm formation in animal caps. In mouse embryos, Gdf3 is expressed in the inner cell mass and epiblast, and null mutants frequently exhibit abnormal formation or positioning of the AVE. This phenotype correlates with defects in mesoderm and definitive endoderm formation, as well as abnormal Nodal expression levels. Our findings indicate that Gdf3 acts in a Nodal-like signaling pathway in pre-gastrulation development, and provide evidence for the functional conservation of Vg1 activity in mice.