Establishment of the embryonic mesoderm is dependent on integration of multiple signaling and transcriptional inputs. We report that the transcriptional regulator Foxd3 is essential for dorsal mesoderm formation in zebrafish, and that this function is dependent on the Nodal pathway. Foxd3 gain-of-function results in expanded dorsal mesodermal gene expression, including the Nodal-related gene cyclops, and body axis dorsalization. Foxd3 knockdown embryos displayed reduced expression of cyclops and mesodermal genes, axial defects similar to Nodal pathway loss-of-function, and Nodal pathway activation rescued these phenotypes. In MZoep mutants inactive for Nodal signaling, Foxd3 did not rescue mesoderm formation or axial development, indicating that the mesodermal function of Foxd3 is dependent on an active downstream Nodal pathway. A previously identified foxd3 mutant, sym1, was described as a predicted null mutation with neural crest defects, but no mesodermal or axial phenotypes. We find that Sym1 protein retains activity and can induce strong mesodermal expansion and axial dorsalization. A subset of sym1 homozygotes displays axial defects and reduced cyclops and mesodermal gene expression, and penetrance of the mesodermal phenotypes is enhanced by Foxd3 knockdown. Therefore, sym1 is a hypomorphic allele, and reduced Foxd3 function results in a reduction of cyclops expression, and subsequent mesodermal and axial defects. These results demonstrate that Foxd3 is an essential upstream regulator of the Nodal pathway in zebrafish dorsal mesoderm development and establish a broadly conserved role for Foxd3 in vertebrate mesodermal development.