Setting up future body axes is the first important event before and at the beginning of embryogenesis. The ascidian embryo is a classic model that has been used to gain insight into developmental processes for over a century. This review summarizes advances made in this decade in our understanding of the developmental processes involved in the specification of the embryonic axes and cell fates during early ascidian embryogenesis. Maternal factors, including mRNAs, are translocated to specific regions of the egg by cytoplasmic and cortical reorganization, so-called ooplasmic segregation, and specify the animal–vegetal axis and the one perpendicular to it, which is defined as the anteroposterior axis in ascidians. Some postplasmic/PEM RNAs that are anchored to cortical endoplasmic reticulum are brought to the future posterior pole of fertilized eggs, and play crucial roles in posterior development. Following specification of the animal–vegetal axis, nuclear localization of β-catenin takes place in the vegetal blastomeres; this occurrence is important for the acquisition of the vegetal character of the blastomeres in later development. Positioning of these maternal factors lead to subsequent cell interactions and zygotic gene expression responsible for axis establishment and for cell fate specification. We describe how endoderm blastomeres in the vegetal pole region emanate inductive signals mainly attributable to fibroblast growth factor. Marginal blastomeres next to endoderm blastomeres respond differently in ways that are determined by intrinsic competence factors. Expression patterns of developmentally important genes, including key transcription factors of each tissue type, are also summarized. Developmental Dynamics 233:1177–1193, 2005. © 2005 Wiley-Liss, Inc.