The transcription factor p53 has been shown to mediate cellular responses to diverse stresses such as DNA damage. However, the function of p53 in cellular differentiation in response to growth factor stimulations has remained obscure. We present evidence that p53 regulates cellular differentiation by modulating signaling of the TGF beta family of growth factors during early Xenopus embryogenesis. We show that p53 functionally and physically interacts with the activin and bone morphogenetic protein pathways to directly induce the expression of the homeobox genes Xhox3 and Mix.1/2. Furthermore, functional knockdown of p53 in embryos by an antisense morpholino oligonucleotide reveals that p53 is required for the development of dorsal and ventral mesoderm. Our data illustrate a pivotal role of interplay between the p53 and TGF beta pathways in cell fate determination during early vertebrate embryogenesis.