AbstractThe ultimobranchial body (UBB) is an outpocketing of the fourth pharyngeal pouch that fuses with the thyroid diverticulum, giving rise to calcitonin‐producing C‐cells. In this study, we demonstrate that the UBB is composed of two types of cells: one expressing T/ebp/Nkx2.1 and the other expressing p63. The former cell type, accounting for a majority of the UBB, requires T/ebp/Nkx2.1 for their survival. In contrast, the p63‐positive cells, even in the absence of T/ebp/Nkx2.1 expression, can proliferate and give rise to a vesicular structure that is lined by a monolayer of p63‐negative cells, surrounded by a cluster and/or single layer of p63‐positive cells, displaying the basal/stem cell phenotype. T/ebp/Nkx2.1 haploinsufficiency causes abnormal fusion of the UBB with the thyroid diverticulum, which stays as a cluster of C‐cells around the vesicular structure, similar to the one observed in mice null for T/ebp/Nkx2.1 expression. These results demonstrate that T/ebp/Nkx2.1 plays a role in the survival of UBB cells, their dissemination into the thyroid diverticulum, and the formation of UBB‐derived vesicular structure. Developmental Dynamics 235:1300–1309, 2006. © 2005 Wiley‐Liss, Inc.