Classical transplantation studies using chick and quail embryos demonstrated that the vertebrate liver parenchyma is derived from an outgrowth of the ventral foregut endoderm, referred to as the liver bud (LeDouarin 1964, 1968, 1975). This process, illustrated in Figure 1, initiates at around gestation day 8.25 (7–8 somites) in the mouse (Gualdi et al. 1996). Invagination of the foregut positions a ventral portion of foregut endoderm next to the developing cardiac mesoderm. Early on, it was proposed that specification of the hepatic diverticulum relied upon the close proximity of cardiac mesoderm. Several studies, the most recent by Gualdi et al.(1996), provided strong evidence to support this proposal. In general, it was found that ventral endoderm from either mouse or chick was unable to adopt a hepatic fate, or express characteristic hepatic mRNAs, if it were grown in the absence of developing cardiac tissue (LeDouarin 1975; Houssaint 1980; Fukuda-Taira 1981; Gualdi et al. 1996). Moreover, this inductive capacity seemed to be restricted to cardiac mesoderm, because other noncardiac mesoderms failed to induce hepatic development (Fukuda 1979; Fukuda-Taira 1981).