Mesoderm induction and endoderm formation are controlled by localized maternal determinants during early Xenopus embryogenesis. TGF-βs, including activins, BMPs, and nodal-related proteins are essential regulators of these processes. They are secreted growth factors, synthesized as proproteins and cleaved by proprotein convertases. One such convertase, PACE4, is important for processing of Nodal protein in mouse. The primary goal of this dissertation study was to determine whether Xenopus PACE4 homolog, XPACE4, regulates mesoderm induction through specific processing of different TGF-β proteins. We showed that XPACE4 was a vegetally localized maternal mRNA. Loss of maternal XPACE4 function resulted in gastrulation abnormalities and mesoderm induction defect. XPACE4 was required for processing of a subset of TGF-β proteins, Xnr1, 2, 3, and Vg1 (Chapter 2). The second goal of this study was to resolve the function of a localized maternal TGF-β, Vg1, in Xenopus development. We showed that Vg1 mRNA and protein were enriched on the dorsal side of 32-cell stage embryos and Vg1 was required for the early expression of dorso-anterior antagonists chordin and cerberus (Chapter 3). Additionally, we described the serine allele of Vg1 protein which was secreted and could partially rescue the Vg1 depletion phenotype (Chapter 2 and 3). Overall, these results suggest that proper regulation of TGF-β processing by XPACE4 is critical for gastrulation and mesoderm induction and Vg1 is an essential component of these developmental processes.