The endoderm emerges as an epithelial sheet that covers the surface of the developing murine embryo. This tissue will produce the entire gut tube as well as associated digestive and respiratory organs including the thyroid, thymus, lung, liver, and pancreas. The emergence of each endodermal organ occurs in a temporally distinct manner that is dependant upon reciprocal inductive interactions between the endoderm and the underlying mesoderm. The emergence of the hepatic endoderm, which occurs using a morphological process termed liver budding, initiates during early somitogenesis in the mouse at approximately 8.25 days post-coitum (dpc). Explant and transplant studies performed in chicken and mouse have demonstrated that secreted signals from adjacent mesodermal tissues initiate the hepatic gene program from ventral-fated endoderm. Here, we review the data in support of the roles of members of the fibroblast growth factor (FGF), bone morphogenetic protein (BMP), and Wnt signaling pathways in liver budding and discover that little is known about the precise endogenous signals involved in the molecular and morphological induction of liver budding in the mouse. J. Cell. Physiol. 226: 1727–1731, 2011. © 2010 Wiley-Liss, Inc.