Vertebrate hindbrain segmentation is a highly conserved process but the mechanism of rhombomere determination is not well understood. Recent work in the zebrafish has shown a requirement for fibroblast growth factor (Fgf)signaling and for the transcription factor variant hepatocyte nuclear factor 1 (vhnf1) in specification of rhombomeres 5 and 6(r5+r6). We show here that vhnf1 functions in two ways to subdivide the zebrafish caudal hindbrain domain (r4-r7) into individual rhombomeres. First, vhnf1 promotes r5+r6 identity through an obligate synergy with Fgf signals to activate valentino and krox20 expression. Second, vhnf1 functions independently of Fgf signals to repress hoxb1a expression. Although vhnf1 is expressed in a broad posterior domain during gastrulation, it promotes the specification of individual rhombomeres. This is achieved in part because vhnf1 gives cellular competence to respond to Fgf signals in a caudal hindbrain-specific manner.