The T-box gene Eomesodermin (Eomes) is required for early embryonic mesoderm differentiation in mouse, frog (Xenopus laevis), and zebrafish, is important in late cardiac development in Xenopus, and for CD8؉ T effector cell function in mouse. Eomes can ectopically activate many mesodermal genes. However, the mechanism by which Eomes activates transcription of these genes is poorly understood. We report that Eomes protein interacts with Smad2 and is capable of working in a non-cell autonomous manner via transfer of Eomes protein between adjacent embryonic cells. Blocking of Eomes protein transfer using a farnesylated red fluorescent protein (CherryF) also prevents Eomes nuclear accumulation. Transfer of Eomes protein between cells is mediated by the Eomes carboxyl terminus (456 -692). A carbohydrate binding domain within the Eomes carboxyl-terminal region is sufficient for transfer and important for gene activation. We propose a novel mechanism by which Eomes helps effect a cellular response to a morphogen gradient.