The hepatobiliary system develops from a thickening of endothelial cells in the ventral part of the foregut. These cells form the hepatic and cystic diverticula, which undergo a series of events including cellular proliferation, migration, and differentiation to form the liver parenchyma and the ductular system. Studies in the developing liver suggest that surrounding mesoderm and ectoderm participate in the hepatic specification of the endoderm, and that transcription factors such as cJun, retinoblastoma gene, and nuclear factor κB are important regulators of liver embryogenesis. A review of the recent data on the role of transcription factors, growth factors, and cytokines in liver development provides insight on the ability of the liver to respond to injury and on the molecular basis of hepatobiliary diseases.