In early development of Xenopus laevis, it is known that activities of polypeptide growth factors are negatively regulated by their binding proteins. In this study, follistatin, originally known as an activin-binding protein, was shown to inhibit all aspects of bone morphogenetic protein (BMP) activity in early Xenopus embryos. Furthermore, using a surface plasmon resonance biosensor, we demonstrated that follistatin can directly interact with multiple BMPs at significantly high affinities. Interestingly, follistatin was found to be noncompetitive with the BMP receptor for ligand binding and to form a trimeric complex with BMP and its receptor. The results suggest that follistatin acts as an organizer factor in early amphibian embryogenesis by inhibiting BMP activities by a different mechanism from that used by chordin and noggin.