Spatial diversification of the endoderm during gastrulation in the sea urchin Lytechinus variegatus was examined with an endoderm-specific cDNA clone. This cDNA clone, LvN1.2, was identified by a differential cDNA screen between the ectoderm and endoderm/mesoderm fractions from prism stage embryos. The LvN 1.2-kb mRNA was first detectable by Northern blots at the mesenchyme blastula stage just prior to gastrulation and then accumulated approximately 15-fold from gastrulation to the pluteus stage. In situ hybridization analysis demonstrated that the mRNA accumulated specifically in endoderm and was restricted to the hindgut-midgut regions. This restricted localization was apparent during gastrulation and predicted the morphological distinction between foregut and midgut eventually seen at prism and pluteus stages. Sequence analysis showed that the 189-amino acid open reading frame represented a novel protein. In vitro translation of synthetically produced LvN1.2 mRNA and Western blot analysis with antibodies to the protein sequence yielded the same 25-kDa polypeptide on SDS-PAGE. The LvN1.2 protein resided within discrete granules of the hindgut and midgut cells. These particles were concentrated to the luminal aspect of the cells, suggesting the LvN1.2 protein participates in the digestive function of this region of the gut.