Previous studies of knock-out mouse embryos have shown that the Wilms' tumor suppressor gene (Wt1) is indispensable for the development of kidneys, gonads, heart, adrenals and spleen. Using OPT (Optical Projection Tomography) we have found a new role for Wt1 in mouse liver development. In the absence of Wt1, the liver is reduced in size, and shows lobing abnormalities. In normal embryos, coelomic cells expressing Wt1, GATA-4, RALDH2 and RXRalpha delaminate from the surface of the liver, intermingle with the hepatoblasts and incorporate to the sinusoidal walls. Some of these cells express desmin, suggesting a contribution to the stellate cell population. Other cells, keeping high levels of RXRalpha immunoreactivity, are negative for stellate or smooth muscle cell markers. However, coelomic cells lining the liver of Wt1-null embryos show decreased or absent RALDH2 expression, the population of cells expressing high levels of RXRalpha is much reduced and the proliferation of hepatoblasts and RXRalpha-positive cells is significantly decreased. On the other hand, the expression of smooth muscle cell specific alpha-actin increases throughout the liver, suggesting an accelerated and probably anomalous differentiation of stellate cell progenitors. We describe a similar retardation of liver growth in RXRalpha-null mice as well as in chick embryos after inhibition of retinoic acid synthesis. We propose that Wt1 expression in cells delaminating from the coelomic epithelium is essential for the expansion of the progenitor population of liver stellate cells and for liver morphogenesis. Mechanistically, at least part of this effect is mediated via the retinoic acid signaling pathway.