The segregation of cells into germ layers is one of the earliest events in the establishment of cell fate in the embryo. In the zebrafish, endoderm and mesoderm are derived from cells that involute into an internal layer, the hypoblast, whereas ectoderm is derived from cells that remain in the outer layer, the epiblast. In this study, we examine the origin of the zebrafish endoderm and its separation from the mesoderm. By labeling individual cells located at the margin of the blastula, we demonstrate that all structures that are endodermal in origin are derived predominantly from the more dorsal and lateral cells of the blastoderm margin. Frequently marginal cells give rise to both endodermal and mesodermal derivatives, demonstrating that these two lineages have not yet separated. Cells located farther than 4 cell diameters from the margin give rise exclusively to mesoderm, and not to endoderm. Following involution, we see a variety of cellular changes indicating the differentiation of the two germ layers. Endodermal cells gradually flatten and extend filopodial processes forming a noncontiguous inner layer of cells against the yolk. At this time, they also begin to express Forkhead-domain 2 protein. Mesodermal cells form a coherent layer of round cells separating the endoderm and ectoderm. In cyclops-mutant embryos that have reduced mesodermal anlage, we demonstrate that by late gastrulation not only mesodermal but also endodermal cells are fewer in number. This suggests that a common pathway initially specifies germ layers together before a progressive sequence of determinative events segregate endoderm and mesoderm into morphologically distinct germ layers.