The roles of Lef/Tcf proteins in determining cell fate characteristics have been described in many contexts during vertebrate embryogenesis, organ and tissue homeostasis, and cancer formation. Although much of the accumulated work on these proteins involves their ability to transactivate target genes when stimulated by beta-catenin, Lef/Tcf proteins can repress target genes in the absence of stabilized beta-catenin. By ablating Tcf3 function, we have uncovered an important requirement for a repressor function of Lef/Tcf proteins during early mouse development. Tcf3-/- embryos proceed through gastrulation to form mesoderm, but they develop expanded and often duplicated axial mesoderm structures, including nodes and notochords. These duplications are preceded by ectopic expression of Foxa2, an axial mesoderm gene involved in node specification, with a concomitant reduction in Lefty2, a marker for lateral mesoderm. By contrast, expression of a beta-catenin-dependent, Lef/Tcf reporter (TOPGal), is not ectopically activated but is faithfully maintained in the primitive streak. Taken together, these data reveal a unique requirement for Tcf3 repressor function in restricting induction of the anterior-posterior axis.