ABSTRACT Mesoderm induction is fundamental for establishing the basic body plan of the vertebrate embryo and mutations are critical for dissecting this process. Mouse embryos lacking msd (mesoderm deficiency) do not produce mesoderm but have well-defined extraembryonic and thickened embryonic ectoderm. Distribution of transcripts indicate that temporal regulation of gene expression relevant to gastrulation has begun but primitive-streak formation and mesoderm induction are blocked. Both msd-deficient embryos and embryonic stem (ES) cells fail to form highly differentiated structures of mesoderm origin, but are capable of ectodermal differentiation. Thus, the effects of the msd mutation are restricted to mesoderm formation and could result from the inability to respond to an inducing signal.