The vertebrate liver and heart arise from adjacent cell layers in the anterior lateral (AL) endoderm and mesoderm of late gastrula embryos, and the earliest stages of liver and heart development are interrelated through reciprocal tissue interactions. Although classical embryological studies performed several decades ago in chick and quail defined the timing of hepatogenic induction in birds and the important role for cardiogenic mesoderm in this process, almost nothing is known about the molecular aspects of avian liver development. Here we use in vivo and explantation assays to investigate tissue interactions and signaling pathways regulating Hex, a homeobox gene required for liver development, and the earliest stages of hepatogenesis in the chick embryo. We find that explants of late gastrula anterior lateral endoderm plus mesoderm, which have been used extensively for studies relating to heart development, also produce albumin-expressing hepatoblasts. Expression of Hex, the earliest known molecular marker for the hepatogenic endoderm, and albumin, indicative of early committed hepatoblasts, requires both autocrine Bmp signaling and a specific paracrine signal from the cardiogenic (anterior lateral) mesoderm. Endodermal expression of Fox2a, in contrast, requires the mesoderm but is independent of Bmp signaling. In vivo induction assays show that the ability of BMP2 to activate Hex expression in the endoderm is restricted to a region that is only slightly larger than the endogenous domain of Hex expression. Although Fgfs can substitute for the cardiogenic mesoderm to support the expression of Hex and albumin in the endoderm, several Fgf genes are expressed in the anterior lateral endoderm but an Fgf expressed predominantly in the mesoderm was not identified. Studies also showed that Fgf gene expression in the endoderm does not require a signal from the mesoderm. Mechanisms regulating endodermal signaling pathways activated by Fgfs may therefore be more complex than previously appreciated.