During liver development, hepatoblasts differentiate into hepatocytes or biliary epithelial cells (BEC). The BEC delineate the intrahepatic and extrahepatic bile ducts, and the gallbladder. The transcription factors that control the development of the biliary tract are unknown. Previous work has shown that the onecut transcription factor HNF6 is expressed in hepatoblasts and in the gallbladder primordium. We now show that HNF6 is also expressed in the BEC of the developing intrahepatic bile ducts, and investigate its involvement in biliary tract development by analyzing the phenotype of Hnf6(-/-) mice. In these mice, the gallbladder was absent, the extrahepatic bile ducts were abnormal and the development of the intrahepatic bile ducts was perturbed in the prenatal period. The morphology of the intrahepatic bile ducts was identical to that seen in mice whose Hnf1beta gene has been conditionally inactivated in the liver. HNF1beta expression was downregulated in the intrahepatic bile ducts of Hnf6(-/-) mice during development. Furthermore, we found that HNF6 can stimulate the Hnf1beta promoter. We conclude that HNF6 is essential for differentiation and morphogenesis of the biliary tract and that intrahepatic bile duct development is controlled by a HNF6-->HNF1beta cascade.