For over a century, amphibian embryos have been a source of significant insight into developmental mechanisms, including fundamental discoveries about the process of induction. The recently developed transgenesis for Xenopus offers new approaches to these poorly understood processes, particularly when undertaken in the quickly maturing species Xenopus tropicalis, which greatly facilitates establishment of permanent transgenic lines. Several X. tropicalis transgenic lines have now been generated, and experiments demonstrating the value of these lines to study induction in embryonic tissue recombinants and explants are presented here. A revised protocol for transgenesis in X. tropicalis resulting in a significant increase in the percentage of transgenic animals that reach adulthood is presented, as well as improvements in tadpole and froglet husbandry, which have facilitated the raising of large numbers of adults. Working transgenic populations have been rapidly expanded, and some transgenes have been bred to homozygosity. Established lines include those bearing the promoter regions of Pax-6, Otx-2, Rx, and EF1alpha coupled to fluorescent reporter genes. Multireporter lines combining, in a single animal, up to three gene promoters coupled to different fluorescent reporters have also been established. The value of X. tropicalis transgenic lines for the study of induction is demonstrated by showing activation of Pax-6 by noggin treatment of Pax-6/GFP transgenic animal caps, illustrating how reporter lines allow a rapid, in vivo assay for an inductive response. An experiment showing lens induction in gamma-crystallin/GFP transgenic lens ectoderm when it is recombined with mouse optic vesicle demonstrates conservation of inducing signals from amphibians and mammals. It also shows how the warmer culture temperatures tolerated by X. tropicalis embryos can be used in assays of factors produced by mammalian cells and tissues. The many applications of transgenic reporter lines and other lines designed to target gene expression in particular tissues promise to bring significant new insights to the classic issues first defined in amphibian systems.