We have isolated a novel gene, charon, that encodes a member of the Cerberus/Dan family of secreted factors. In zebrafish, Fugu and flounder, charon is expressed in regions embracing Kupffer's vesicle, which is considered to be the teleost fish equivalent to the region of the mouse definitive node that is required for left-right (L/R) patterning. Misexpression of Charon elicited phenotypes similar to those of mutant embryos defective in Nodal signaling or embryos overexpressing Antivin(Atv)/Lefty1, an inhibitor for Nodal and Activin. Charon also suppressed the dorsalizing activity of all three of the known zebrafish Nodal-related proteins (Cyclops, Squint and Southpaw), indicating that Charon can antagonize Nodal signaling. Because Southpaw functions in the L/R patterning of lateral plate mesoderm and the diencephalon, we asked whether Charon is involved in regulating L/R asymmetry. Inhibition of Charon's function by antisense morpholino oligonucleotides (MOs) led to a loss of L/R polarity, as evidenced by bilateral expression of the left side-specific genes in the lateral plate mesoderm (southpaw, cyclops, atv/lefty1, lefty2 and pitx2) and diencephalon (cyclops, atv/lefty1 and pitx2), and defects in early (heart jogging) and late (heart looping) asymmetric heart development, but did not disturb the notochord development or the atv/lefty1-mediated midline barrier function. MO-mediated inhibition of both Charon and Southpaw led to a reduction in or loss of the expression of the left side-specific genes, suggesting that Southpaw is epistatic to Charon in left-side formation. These data indicate that antagonistic interactions between Charon and Nodal (Southpaw), which take place in regions adjacent to Kupffer's vesicle, play an important role in L/R patterning in zebrafish.