Stat3 is one of the main signaling components of cytokine receptors, including gp130. Here we show that activation of cytokine receptor gp130 resulted in a dramatic ventralization of Xenopus embryos and that the ventralization correlated well with Stat3 activation potential of the receptor. This finding led to identification of Xenopus Stat3 (Xstat3), which showed a 95% homology to its murine and human counterparts, at the amino acid level, and was expressed from the one-cell stage throughout development. The mechanism of gp130/XStat3-mediated ventralization proved to be independent of BMP-4. gp130/Xstat3 stimulation inhibited Smad2-induced ectopic axis formation in embryos and Smad2-dependent luciferase activity. A dominant-negative Stat3, in contrast, dorsalized Xenopus embryos, resulting in ectopic axis formation. We propose that Stat3-mediated signaling has the capacity to modify dorsoventral patterning in the early development of Xenopus.