Fibroblast growth factor (FGF)/extracellular signal-regulated kinase (ERK) signaling plays a crucial role in anterior-posterior (A-P) axial patterning of vertebrate embryos by promoting posterior development. In our screens for novel developmental regulators in Xenopus embryos, we identified Fam3b as a secreted factor regulated in ectodermal explants. Family with sequence similarity 3 member B (FAM3B)/PANDER (pancreatic-derived factor) is a cytokine involved in glucose metabolism, type 2 diabetes, and cancer in mammals. However, the molecular mechanism of FAM3B action in these processes remains poorly understood, largely because its receptor is still unidentified. Here we uncover an unexpected role of FAM3B acting as a FGF receptor (FGFR) ligand in Xenopus embryos. fam3b messenger RNA (mRNA) is initially expressed maternally and uniformly in the early Xenopus embryo and then in the epidermis at neurula stages. Overexpression of Xenopus fam3b mRNA inhibited cephalic structures and induced ectopic tail-like structures. Recombinant human FAM3B protein was purified readily from transfected tissue culture cells and, when injected into the blastocoele cavity, also caused outgrowth of tail-like structures at the expense of anterior structures, indicating FGF-like activity. Depletion of fam3b by specific antisense morpholino oligonucleotides in Xenopus resulted in macrocephaly in tailbud tadpoles, rescuable by FAM3B protein. Mechanistically, FAM3B protein bound to FGFR and activated the downstream ERK signaling in an FGFR-dependent manner. In Xenopus embryos, FGFR activity was required epistatically downstream of Fam3b to mediate its promotion of posterior cell fates. Our findings define a FAM3B/FGFR/ERK-signaling pathway that is required for axial patterning in Xenopus embryos and may provide molecular insights into FAM3B-associated human diseases.