The results of several new studies encourage a revision of fundamental hypotheses concerning the cellular and molecular mechanisms underlying pancreatic morphogenesis and cell differentiation in the embryo. The roles of FGF- and BMP-signaling indicate a fundamental difference in the induction of the dorsal and the ventral pancreatic anlage. Final commitment to the pancreatic fate requires the action of several transcriptional regulators including IPF1/PDX1, PBX1 and PTF1-P48 after the onset of pancreatic bud formation. Two, largely independent endocrine cell lineages develop during the formation of the embryonic pancreas. Lineage tracing has begun to refine our understanding of the origins of the acinar, ductal and islet cells.