The transforming-growth-factor-beta (TGF-beta) superfamily is critical for establishing mesoderm during early embryogenesis in Xenopus. The transcriptional activation of Mix.2, an immediate-early response gene specific to activin-like members of the TGF-beta superfamily, is associated with the rapid appearance of a site-specific DNA-binding activity that recognizes a fifty-base-pair regulatory element known as ARE in the Mix.2 promoter. Cloning of the site-specific DNA-binding component of this activity revealed it to be a new winged-helix transcription factor and a direct target for signalling by the TGF-beta superfamily. XMAD2, a recently identified TGF-beta signal transducer, forms a complex with the transcription factor in an activin-dependent fashion to generate an activated ARE-binding complex. A model is proposed to explain how TGF-beta superfamily signals might regulate the expression of specific genes in the early embryo.