Members of the activin family are believed to act as mesoderm-inducing factors during early amphibian development. Little is known, however, about mesoderm formation in the mammalian embryo, and as one approach to investigating this we have studied activin and follistatin expression during early mouse development. Activins are homo- or heterodimers of the beta A or beta B subunits of inhibin, itself a heterodimer consisting of one of the beta subunits together with an alpha subunit. Follistatin is a single-chain polypeptide which inhibits activin function. Expression of the inhibin alpha chain could not be detected in embryonic or extraembryonic tissues at any of the stages studied (5.5 to 8.5 days) and expression of the beta A and beta B subunits could only be observed in the deciduum in cells surrounding the embryo. Expression of follistatin could also be detected in the deciduum, but in a pattern complementary to that of the beta subunits. Embryonic expression of follistatin first occurred in the primitive streak, and at later stages transcripts were detectable in the somites and in rhombomeres 2, 4 and 6 of the hindbrain. These results are consistent with a role for activin in mesoderm formation in the mouse embryo, and suggest functions for follistatin in addition to its role as an inhibitor of activin.