We have utilized the polymerase chain reaction (PCR)-based differential display methodology (Liang, P., and Pardee, A. B. (1992) Science 257, 967-969) to identify a novel transcript whose expression levels increased in Xenopus embryo explants during mesoderm induction by fibroblast growth factor. The PCR product was used to clone a 2.3-kilobase pair cDNA representing this transcript, which we have named er1 (early response 1). The er1 cDNA contained a single open reading frame predicted to encode a protein of 493 amino acid residues. A data base homology search revealed that the predicted ER1 amino acid sequence contains three regions of similarity to the rat and human proteins encoded by the metastasis-associated gene, mta1, and two regions of similarity to the Caenorhabditis elegans sequence that is similar to mta1. The fibroblast growth factor-induced increase in er1 steady-state levels was not dependent on de novo protein synthesis, demonstrating that er1 is an immediate-early gene. Northern blot analysis revealed a single 2.8-kilobase pair mRNA that was observed predominantly during the initial cleavage and blastula stages of Xenopus development, with little or no detectable mRNA during subsequent development. Quantitative PCR analysis of early developmental stages showed that er1 peaked during late blastula. Computer-assisted analysis of the predicted ER1 amino acid sequence revealed two putative nuclear localization signals, four highly acidic regions clustered at the N terminus and a proline-rich region located near the C terminus. Subcellular localization by immunocytochemistry revealed that the ER1 protein was targeted exclusively to the nucleus. Transactivation assays using various regions of ER1 fused to the DNA binding domain of GAL4 demonstrated that the N-terminal acidic region is a potent transactivator. These data suggest that ER1 may function as a transcription factor.