The signaling molecules that elicit embryonic induction of the liver from the mammalian gut endoderm or induction of other gut-derived organs are unknown. Close proximity of cardiac mesoderm, which expresses fibroblast growth factors (FGFs) 1, 2, and 8, causes the foregut endoderm to develop into the liver. Treatment of isolated foregut endoderm from mouse embryos with FGF1 or FGF2, but not FGF8, was sufficient to replace cardiac mesoderm as an inducer of the Liver gene expression program, the latter being the first step of hepatogenesis. The hepatogenic; response was restricted to endoderm tissue, which selectively coexpresses FGF receptors 1 and 4. Further studies with FGFs and their specific inhibitors showed that FGF8 contributes to the morphogenetic outgrowth of the hepatic endoderm. Thus, different FGF signals appear to initiate distinct phases of liver development during mammalian organogenesis.