Newly formed mesoderm is patterned into dorsal-ventral subtypes through combinatorial interactions of paracrine signaling pathways. How these signals are integrated to induce specific dorsal-ventral cell fates is not well understood. The vertebrate tailbud provides a simplified model to understand in vivo mesodermal patterning. Newly formed mesoderm in the zebrafish tailbud undergoes a binary decision to become either dorsal paraxial mesoderm, or ventral endothelial tissue. We show that tailbud mesoderm is patterned by interactions between canonical Wnt, FGF, and BMP signaling, where Wnt and FGF induce paraxial fate, and BMP promotes endothelial fate. The mechanism of signal integration of these three independent pathways is at the level of basic helix loop helix (bHLH) transcription factor activity, which produces a binary cell fate output. High bHLH activity induces paraxial fate, while low bHLH activity results in endothelial induction. Consistent with predictions from this model, we show that endothelium is the default fate of newly generated tailbud mesoderm. We extend our analysis to show that the same mechanism is responsible for the dorsal-ventral patterning of the entire mesodermal germ layer during gastrulation. Unexpectedly, this mechanism only affects dorsal-ventral mesodermal patterning and has no effect on anterior-posterior pattern, providing evidence for the molecular uncoupling of dorsal-ventral and anterior-posterior patterning downstream of Wnt, FGF, and BMP signaling.