Liver development is a sequential array of distinct biological events. Each step of differentiation is regulated by intrinsically programmed mechanisms as well as by extracellular signals. The establishment of cell culture systems that recapitulate each stage of liver development has led to the identification of several extracellular signals that affect hepatocytic differentiation. Furthermore, studies on genetically engineered animals, especially knockout and transgenic mice, have highlighted a number of molecules essential for liver development. By applying primary culture techniques to analyses of mutant mice, it is now possible to link extracellular signals to intracellular pathways that provoke cellular responses of differentiation. Improvement in gene transfer technology utilizing viral vectors has further expanded the molecular analysis of liver development. In this review article, we summarize recent advances and attempt to describe the molecular basis of liver development from beginning to end as a sequential event.