Here we describe a novel Xenopus homeobox gene, milk, related by sequence homology and expression pattern to the vegetally expressed Mix.1. As is the case with Mix.1, milk is an immediate early response gene to the mesoderm inducer activin. milk is expressed at the early gastrula stage in the vegetal cells, fated to form endoderm, and in the marginal zone fated to form mesoderm. During gastrulation, expression of milk becomes progressively reduced in the involuting mesodermal cells but is retained in the endoderm, suggesting that it may play a key role in the definition of the endo-mesodermal boundary in the embryo. Overexpression of milk in the marginal zone blocks mesodermal cell involution, represses the expression of several mesodermal genes such as Xbra, goosecoid, Xvent-1 or Xpo and increases the expression of the endodermal gene, endodermin. In the dorsal marginal zone, overexpression of milk leads to a severe late phenotype including the absence of axial structures. Ectopic expression of milk in the animal hemisphere or in ectodermal explants induces a strong expression of endodermin. Taken together, we propose that milk plays a role in the correct patterning of the embryo by repressing mesoderm formation and promoting endoderm identity.