Normal development appears to involve a progressive restriction in developmental potential. However, recent evidence suggests that this progressive restriction is not irreversible and can be altered to reveal novel phenotypic potentials of stem, progenitor, and even differentiated cells. While some of these results can be explained by the presence of contaminating cell populations, persistence of pluripotent stem cells, cell fusion, etc., several examples exist that are difficult to explain as anything other than “true transdifferentiation” and/or dedifferentiation. These examples of transdifferentiation are best explained by understanding how the normal process of progressive cell fate restriction occurs during development. We suggest that subversion of epigenetic controls regulating cell type specific gene expression likely underlies the process of transdifferentiation and it may be possible to identify specific factors to control the transdifferentiation process. We predict, however, that transdifferentiation will not be reliable or reproducible and will probably require complex manipulations. Published 2002 Wiley-Liss, Inc.