The limb and external genitalia are appendages of the body wall. Development of these structures differs fundamentally in that masculine development of the external genitalia is androgen dependent, whereas development of the limb is not. Despite this fundamental difference in developmental regulation, epithelial-mesenchymal interactions play key roles in the development of both structures, and similar regulatory molecules are utilized as mediators of morphogenetic cell-cell interactions during development of both the limb and external genitalia. Given the relatively high incidence of hypospadias, a malformation of penile development, it is appropriate and timely to review the morphological, endocrine, and molecular mechanisms of development of the genital tubercle (GT), the precursor of the penis in males and the clitoris in females. Morphological observations comparing development of the GT in humans and mouse emphasize the validity of the mouse as an animal model of GT development and validate the results of experimental studies. Accordingly, the use of mutant mice provides important insights into the roles of specific regulatory molecules in development of the external genitalia. While our current understanding of the morphological and molecular mechanisms of mammalian external genitalia development is still rudimentary, this review summarizes the current state of our knowledge and whenever possible draws from the rich experimental embryology literature on other relevant organs such as the developing limb. Future research on the hormonal and molecular mechanisms of GT development may yield strategies to prevent or reduce the incidence of hypospadias and to elucidate the molecular genetic mechanisms of GT morphogenesis, especially in relation to common organogenetic pathways utilized in other organ systems.