Head formation requires simultaneous inhibition of multiple caudalizing signals during early vertebrate embryogenesis. We identified a novel antagonist against Wnt and FGF signaling for head formation, Shisa, which functions cell autonomously in the endoplasmic reticulum (ER). Shisa is specifically expressed in the prospective head ectoderm and the Spemann organizer of Xenopus gastrulae. Overexpression of Shisa inhibited both Wnt and FGF signaling in Xenopus embryos and in a cell line. Loss of Shisa function sensitized the neuroectoderm to Wnt signaling and suppressed head formation during gastrulation. Shisa physically interacted with immature forms of the Wnt receptor Frizzled and the FGF receptor within the ER and inhibited their posttranslational maturation and trafficking to the cell surface. Taken together, these findings indicate that Shisa is a novel molecule that controls head formation by regulating the establishment of the receptors for caudalizing factors.