Arabidopsis shoots regenerate from root explants in tissue culture through a two-step process requiring preincubation on an auxin-rich callus induction medium (CIM) followed by incubation on a cytokinin-rich shoot induction medium (SIM). During CIM preincubation, root explants acquire competence to respond to shoot induction signals. During CIM preincubation, pericycle cells in root explants undergo cell divisions and dedifferentiate, losing the expression of a pericycle cell-specific marker. These cells acquire competence to form green callus only after one day CIM preincubation and to form shoots after 2-3 days CIM preincubation. Reversible DNA synthesis inhibitors interfered with the acquisition of competence to form shoots. Genes requiring CIM preincubation for upregulation on SIM were identified by microarray analysis and included RESPONSE REGULATOR 15 (ARR15), POLYGALACTURONASE INHIBITING PROTEIN 2 (PGIP2) and WUSCHEL (WUS). These genes served as developmental markers for the acquisition of competence because the CIM preincubation requirements for ARR15 and PGIP2 upregulation correlated well with the acquisition of competence to form green callus, and the CIM preincubation requirements for WUS upregulation matched those for shoot formation. Unlike ARR15, another cytokinin inducible, A-type ARR gene, ARR5, was upregulated on SIM, but the induction did not require CIM preincubation. These findings indicate that competencies for various events associated with shoot regeneration are acquired progressively during CIM preincubation, and that a set of genes, normally upregulated on SIM, are repressed by a process that can be relieved by CIM preincubation.