The liver develops following budding from the embryonic endoderm, the germ layer responsible for the formation of the gastrointestinal tract, the endocrine glands, and respiratory tract. Hepatic tissue buds are rapidly vascularized and subsequently increase in size. Specifically, the liver develops from multipotent populations of endoderm cells in the paired lateral domains and a medial ventral domain. Early markers of hepatic differentiation in the endoderm include expression of alpha-fetoprotein, albumin, and transthyretin. These cells are considered hepatoblasts and differentiate further to form hepatocytes. Understanding the signaling cascades that underlie the formation of hepatic progenitor cells is a focus of research directed toward the treatment of hepatic diseases, such as severe liver failure.