Activin, a member of the transforming growth factor beta (TGF-beta) superfamily, signals through a heteromeric complex of type I and type II serine-threonine kinase receptors, The two activin type I receptors previously identified, ALK-2 (ActR-I) and ALK-4 (ActR-IB), have distinct effects on gene expression, differentiation and morphogenesis in the Xenopus animal cap assay. ALK-4 reproduces the effects of activin treatment including the dose-dependent induction of progressively more dorso-anterior mesodermal and endodermal markers, whereas ALK-2 induces only ventral mesodermal markers and counteracts the effects of ALK-4, To identify regions of the receptors that determine signaling specificity we have generated chimeras of the constitutively active ALK-2 and ALK-4 receptors (termed ALK-2* and ALK-4*), The effects of these chimeric receptors on gene expression and morphogenetic movements implicate the loop between kinase subdomains TV and V in mediating the strong dorsal gene-inducing properties of ALK-4*; when the seven amino acids comprising this loop are transferred from ALK-4* to ALK-2*, the resulting chimeric receptor is capable of inducing the expression of dorsal-specific genes. In contrast, when the equivalent region of ALK-2* is transferred to the ALK-4* backbone it cannot effectively counteract the dorsalizing effects of ALK-4*, suggesting that other regions of type I receptors are also involved in determining signal specificity.