Using fate mapping techniques, we have analyzed development of cells of the dorsal marginal region in wild-type and mutant zebrafish. We define a domain in the early gastrula that is located just at the margin and centered on the dorsal midline, in which most cells generate clones that develop exclusively as notochord. The borders of the notochord domain are sharp at the level of single cells, and coincide almost exactly with the border of the expression domain of the homeobox gene floating head (flh; zebrafish homologue of Xnot), a gene essential for notochord development. In flh mutants, cells in the notochord domain generate clones of muscle cells. In contrast, notochord domain cells form mesenchyme in embryos mutant for no tail (ntl; zebrafish homologue of Brachyury). A minority of cells in the notochord domain in wild-type embryos develop as unrestricted mesoderm, invariably located in the tail, suggesting that early gastrula expression of flh does not restrict cellular potential to the notochord fate. The unrestricted tail mesodermal fate is also expressed by the forerunner cells, a cluster of cells located outside the blastoderm, adjacent to the notochord domain. We show that cells can leave the dorsal blastoderm to join the forerunners, suggesting that relocation between fate map domains might respecify notochord domain cells to the tail mesodermal fate. An intermediate fate of the forerunners is to form the epithelial lining of Kupffer's vesicle, a transient structure of the teleost tailbud. The forerunners appear to generate the entire structure of Kupffer's vesicle, which also develops in most flh mutants. Although forerunner cells are present in ntl mutants, Kupffer's vesicle never appears, which is correlated with the later severe disruption of tail development.