Endoderm that forms the respiratory and digestive tracts is a sheet of approximately 500-1000 cells around the distal cup of an E7.5 mouse embryo. Within 2 days, endoderm folds into a primitive gut tube from which numerous organs will bud. To characterize the signals involved in the developmental specification of this early endoderm, we have employed an in vitro assay using germ layer explants and show that adjacent germ layers provide soluble, temporally specific signals that induce organ-specific gene expression in endoderm. Furthermore, we show that FGF4 expressed in primitive streak-mesoderm can induce the differentiation of endoderm in a concentration-dependent manner. We conclude that the differentiation of gastrulation-stage endoderm is directed by adjacent mesoderm and ectoderm, one of the earliest reported patterning events in formation of the vertebrate gut tube.