Genetic analysis, embryonic tissue explantation and in vivo chromatin studies have together identified the distinct regulatory steps that are necessary for the development of endoderm into a bud of liver tissue and, subsequently, into an organ. In this review, I discuss the acquisition of competence to express liver-specific genes by the endoderm, the control of early hepatic growth, the coordination of hepatic and vascular development and the cell differentiation that is necessary to generate a functioning liver. The regulatory mechanisms that underlie these phases are common to the development of many organ systems and might be recapitulated or disrupted during stem-cell differentiation and adult tissue pathogenesis.