The mechanisms which regulate myocardial differentiation are poorly understood. The cardiac-lethal (c) mutant of Ambystoma mexicanum, in which the heart never begins to beat, provides a valuable model system for studying this process. Using an in vitro assay, we examine the nature of the defect in c/c embryos and find (contrary to previous reports) that the inductive endoderm is not affected by the mutation. Rather, the pre-cardiac mesoderm is directly affected by the c gene and is incapable of responding to normal inductive influences. Furthermore, we find that mutant mesoderm can complete its differentiation into functional cardiomyocytes when co-cultured with wild-type heart mesoderm. With this evidence, we propose a model for the regulation of heart differentiation based on the migration of the heart mesoderm over a gradient of inducer, and the subsequent establishment of a two-component reaction-diffusion system within the mesoderm itself. This model has the potential to explain several poorly understood aspects of cardiogenesis, including the gradual nature of heart induction, the restriction of the heart field, and possibly the early morphogenesis of the heart tube.