Genetic and biochemical data have identified Smad4 as a key intracellular effector of the transforming growth factor beta (TGFbeta superfamily of secreted ligands. In mouse, Smad4-null embryos do not gastrulate, a phenotype consistent with loss of other TGFbeta-related signaling components. Chimeric analysis reveals a primary requirement for Smad4 in the extra-embryonic lineages; however, within the embryo proper, characterization of the specific roles of Smad4 during gastrulation and lineage specification remains limited. We have employed a Smad4 conditional allele to specifically inactivate the Smad4 gene in the early mouse epiblast. Loss of Smad4 in this tissue results in a profound failure to pattern derivatives of the anterior primitive streak, such as prechordal plate, node, notochord and definitive endoderm. In contrast to these focal defects, many well-characterized TGFbeta- and Bmp-regulated processes involved in mesoderm formation and patterning are surprisingly unaffected. Mutant embryos form abundant extra-embryonic mesoderm, including allantois, a rudimentary heart and middle primitive streak derivatives such as somites and lateral plate mesoderm. Thus, loss of Smad4 in the epiblast results not in global developmental abnormalities but instead in restricted patterning defects. These results suggest that Smad4 potentiates a subset of TGFbeta-related signals during early embryonic development, but is dispensable for others.