The formation of nitrogen-fixing nodules on legumes requires an integration of infection by rhizobia at the root epidermis and the initiation of cell division in the cortex, several cell layers away from the sites of infection. Several recent developments have added to our understanding of the signaling events in the epidermis associated with the perception of rhizobial nodulation factors and the role of plant hormones in the activation of cell division leading to nodule morphogenesis. This review focuses on the tissue-specific nature of the developmental processes associated with nodulation and the mechanisms by which these processes are coordinated during the formation of a nodule.