Over the past decade, the genetics of external genital development have begun to be understood. Male and female external genitalia develop from the genital tubercle. The early tubercle has a superficial resemblance to the limb bud, but an important distinction is that the limb consists of only mesoderm and ectoderm, whereas the genital tubercle also has an endodermal component, the urethral epithelium. Urethral epithelium, which expresses Sonic hedgehog, acts as a signaling region that controls outgrowth and pattern formation, and ultimately differentiates into the urethral tube. While there are intriguing parallels between limb and genital development, recent studies have identified some key differences, including the role of Fgf signaling. Our understanding of the mechanisms of genital development still lags far behind the limb, and major questions remain to be answered, including the molecular nature of the signals that initiate genital budding, sustain outgrowth, induce tissue polarity and orchestrate urethral tubulogenesis. Developmental Dynamics 240:1108–1115, 2011. © 2011 Wiley-Liss, Inc.