Ligand-bound nuclear receptors (NRs) recruit cofactors such as members of the p160 family and CREB-binding protein (CBP) to activate transcription. We have cloned the Xenopus homologue of the human transcription intermediary factor 2 (TIF2), a member of the p160 family of cofactors. Xenopus TIF2 (XTIF2) mRNA is expressed homogeneously during late blastula-early gastrula stages and later becomes highly expressed in the notochord. To study the function of XTIF2 during development, we have used two dominant negative constructs, one encompassing the NR-binding domain and the other the CBP interacting region of XTIF2. Overexpression of the XTIF2 dominant negative mRNAs causes ectopic expression of Xenopus Brachyury (Xbra) and MyoD in all tissue layers. Moreover, ectopic expression of the dominant negative construct that contains the CBP-binding region produces strong phenotypes at hatching stage such as loss of head structures, shortened trunks and open blastopores, which can be rescued by XTIF2 coexpression. These observed defects are due, at least in part, to repression of dorsal mesoderm and endoderm genes. Our data suggest the existence of a NR pathway that requires XTIF2 and CBP to repress Xbra and XMyoD.