Mutations at the mouse Fused locus have pleiotropic developmental effects, including the formation of axial duplications in homozygous embryos. The product of the Fused locus, Axin, displays similarities to RGS (Regulators of G-Protein Signaling) and Dishevelled proteins. Mutant Fused alleles that cause axial duplications disrupt the major mRNA, suggesting that Axin negatively regulates the response to an axis-inducing signal. Injection of Axin mRNA into Xenopus embryos inhibits dorsal axis formation by interfering with signaling through the Wnt pathway. Furthermore, ventral injection of an Axin mRNA lacking the RGS domain induces an ectopic axis, apparently through a dominant-negative mechanism. Thus, Axin is a novel inhibitor of Wnt signaling and regulates an early step in embryonic axis formation in mammals and amphibians.