Foregut development produces a characteristic sequence of gastrointestinal and respiratory organs, but the signaling pathways that ensure this developmental order remain largely unknown. Here, mutations of activin receptors ActRIIA and ActRIIB are shown to disrupt the development of posterior foregut-derived organs, including the stomach, pancreas, and spleen. Foregut expression of genes including Shh and Isl1 is shifted in mutant mice. The endocrine pancreas is particularly sensitive to the type and extent of receptor inactivation. ActRIIA(+/-)B(+/-) animals lack axial defects, but have hypoplastic pancreatic islets, hypoinsulinemia, and impaired glucose tolerance. Thus, activin receptor-mediated signaling regulates axial patterning, cell differentiation, and function of foregut-derived organs.