Rho-dependent amoeboid cell movement is a crucial mechanism in both tumor cell invasion and morphogenetic cell movements during fish gastrulation. Amoeboid movement is characterized by relatively non-polarized cells displaying a high level of bleb-like protrusions. During gastrulation, zebrafish mesodermal cells undergo a series of conversions from amoeboid cell behaviors to more mesenchymal and finally highly polarized and intercalative cell behaviors. We demonstrate that Myosin phosphatase, a complex of Protein phosphatase 1 and the scaffolding protein Mypt1, functions to maintain the precise balance between amoeboid and mesenchymal cell behaviors required for cells to undergo convergence and extension. Importantly, Mypt1 has different cell-autonomous and non-cell-autonomous roles. Loss of Mypt1 throughout the embryo causes severe convergence defects, demonstrating that Mypt1 is required for the cell-cell interactions involved in dorsal convergence. By contrast, mesodermal Mypt1 morphant cells transplanted into wild-type hosts undergo dorsally directed cell migration, but they fail to shut down their protrusive behavior and undergo the normal intercalation required for extension. We further show that Mypt1 activity is regulated in embryos by Rho-mediated inhibitory phosphorylation, which is promoted by non-canonical Wnt signaling. We propose that Myosin phosphatase is a crucial and tightly controlled regulator of cell behaviors during gastrulation and that understanding its role in early development also provides insight into the mechanism of cancer cell invasion.