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The serum response factor (SRF) transcription factor is essential for murine embryogenesis. Srf-/- embryos stop developing at the onset of gastrulation, lacking detectable mesoderm. This developmental defect may reflect cell-autanomous impairment of Srf-/- embryonic cells in mesoderm formation. Alternatively, it may be caused by a non-cell-autonomous defect superimposed upon inappropriate provision of mesoderm-inducing signals to primitive ectodermal cells. We demonstrate that the ability of Srf-/- embryonic stem (ES) cells to differentiate in vitro into mesodermal cells is indeed impaired. However, this impairment can be modulated by external, cell-independent factors. Retinoic acid, but not dimethylsulfoxide, permitted activation of the mesodermal marker gene T(Bra), which was also activated when SRF was expressed in Srf-/- ES cells. Embryoid bodies from Srf-/- ES cell aggregates also activated mesodermal marker genes, but displayed unusual morphologies and impairment in cavitation. Finally, in nude mice, Srf-/- ES cells readily differentiated into mesodermal cells of Srf-/- genotype, including cartilage, bone or muscle cells. We demonstrate that SRF contributes to mesodermal gene expression of ES cells and that Srf-/- ES cells display a non-cell-autanomous defect in differentiation towards mesoderm. [ABSTRACT FROM AUTHOR]