The septum transversum mesenchyme (STM) signals to induce hepatogenesis from the foregut endoderm. Hepatic stellate cells (HSCs) are sinusoidal pericytes assumed to originate from the STM and participate in mesenchymal-epithelial interaction in embryonic and adult livers. However, the developmental origin of HSCs remains elusive due to the lack of markers for STM and HSCs. We previously identified submesothelial cells (SubMCs) beneath mesothelial cells (MCs) as a potential precursor for HSCs in developing livers. In the present study, we reveal that both STM in embryonic day (E) 9.5 and MC/SubMCs in E12.5 share the expression of activated leukocyte cell adhesion molecule (Alcam), desmin, and Wilms tumor 1 homolog (Wt1). A cell lineage analysis using MesP1Cre/Rosa26lacZflox mice identifies the mesodermal origin of the STM, HSCs, and perivascular mesenchymal cells (PMCs). A conditional cell lineage analysis using the Wt1CreERT2 mice demonstrates that Wt1+ STM gives rise to MCs, SubMCs, HSCs, and PMCs during liver development. Furthermore, we find that Wt1+ MC/SubMCs migrate inward from the liver surface to generate HSCs and PMCs including portal fibroblasts, smooth muscle cells, and fibroblasts around the central veins. On the other hand, the Wt1+ STM and MC/SubMCs do not contribute to sinusoidal endothelial cells, Kupffer cells, and hepatoblasts. Conclusion: our results demonstrate that HSCs and PMCs are derived from MC/SubMCs, which are traced back to mesodermal STM during liver development. (HEPATOLOGY 2011;.)