The specification of the vertebrate liver is thought to occur in a two-step process, beginning with the establishment of competence within the foregut endoderm for responding to organ-specific signals, followed by the induction of liver-specific genes. On the basis of expression and in vitro studies, it has been proposed that the Foxa transcription factors establish competence by opening compacted chromatin structures within liver-specific target genes. Here we show that Foxa1 and Foxa2 (forkhead box proteins A1 and A2) are required in concert for hepatic specification in mouse. In embryos deficient for both genes in the foregut endoderm, no liver bud is evident and expression of the hepatoblast marker alpha-fetoprotein (Afp) is lost. Furthermore, Foxa1/Foxa2-deficient endoderm cultured in the presence of exogenous fibroblast growth factor 2 (FGF2) fails to initiate expression of the liver markers albumin and transthyretin. Thus, Foxa1 and Foxa2 are required for the establishment of competence within the foregut endoderm and the onset of hepatogenesis.