p63, a homolog of the tumor suppressor p53, is critical for the development and maintenance of complex epithelia. The developmentally regulated p63 isoform, DeltaNp63, can act as a transcriptional repressor, but the link between the transcriptional functions of p63 and its biological roles is unclear. Based on our initial finding that the mesoderm-inducing factor activin A is suppressed by DeltaNp63 in human keratinocytes, we investigated the role of DeltaNp63 in regulating mesoderm induction during early Xenopus laevis development. We find that down-regulation of DeltaNp63 by morpholino injection in the early Xenopus embryo potentiates mesoderm formation whereas ectopic expression of DeltaNp63 inhibits mesoderm formation. Furthermore, we show that mesodermal induction after down-regulation of DeltaNp63 is dependent on p53. We propose that a key function for p63 in defining a squamous epithelial phenotype is to actively suppress mesodermal cell fates during early development. Collectively, we show that there is a distinct requirement for different p53 family members during the development of both mesodermal and ectodermal tissues. These findings have implications for the role of p63 and p53 in both development and tumorigenesis of human epithelia.