We have isolated a member of the HNF-3/forkhead gene family in ascidians as a means to determine the role of winged-helix genes in chordate development. The MocuFH1 gene, isolated from a Molgula oculata cDNA library, exhibits a forkhead DNA-binding domain most similar to zebrafish axial and rodent HNF-3beta. MocuFH1 is a single copy gene but there is at least one other related forkhead gene in the M. oculata genome. The MocuFH1 gene is expressed in the presumptive endoderm, mesenchyme and notochord cells beginning during the late cleavage stages. During gastrulation, MocuFH1 expression occurs in the prospective endoderm cells, which invaginate at the vegetal pole, and in the presumptive notochord and mesenchyme cells, which involute over the anterior and lateral lips of the blastopore, respectively. However, this gene is not expressed in the presumptive muscle cells, which involute over the posterior lip of the blastopore. MocuFH1 expression continues in the same cell lineages during neurulation and axis formation, however, during the tailbud stage, MocuFH1 is also expressed in ventral cells of the brain and spinal cord. The functional role of the MocuFH1 gene was studied using antisense oligodeoxynucleotides (ODNs), which transiently reduce MocuFH1 transcript levels during gastrulation. Embryos treated with antisense ODNs cleave normally and initiate gastrulation. However, gastrulation is incomplete, some of the endoderm and notochord cells do not enter the embryo and undergo subsequent movements, and axis formation is abnormal. In contrast, the prospective muscle cells, which do not express MocuFH1, undergo involution and later express muscle actin and acetylcholinesterase, markers of muscle cell differentiation. The results suggest that MocuFH1 is required for morphogenetic movements of the endoderm and notochord precursor cells during gastrulation and axis formation. The effects of inhibiting MocuFH1 expression on embryonic axis formation in ascidians are similar to those reported for knockout mutations of HNF-3beta in the mouse, suggesting that HNF-3/forkhead genes have an ancient and fundamental role in organizing the body plan in chordates.