The classically defined induction of the liver from the endoderm, elicited by the cardiac mesoderm, has recently been discovered to involve signaling by fibroblast growth factors (FGFs). Multiple FGFs induce hepatic gene expression independent of an effect on growth. A subset of these FGFs cooperates with other factors to promote morphogenesis of the newly specified hepatocytes. Subsequent to the formation of the liver bud, distinct mesenchymal signals and hepatic response pathways stimulate further growth and differentiation of the hepatic parenchymal cells and prevent apoptosis. The initial stages of hepatogenesis are therefore beginning to be understood, and serve as a paradigm for the development of other tissues from the endoderm.