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Development 113, 217-225 (1991) Printed in Great Britain © The Company of Biologists Limited 1991 217 Hepatocyte differentiation initiates during endodermai-mesenchymal interactions prior to liver formation STEPHANIE CASCIO and KENNETH S. ZARET* Section of Biochemistry, Brown University, Box G, Providence, Rl 02912, USA * Corresponding author Summary Previous studies with embryonic tissue explants showed that cellular interactions with mesenchyme are required for endodermal cells to differentiate into hepatocytes. However, these studies assayed hepatocyte characteristics that were evident after days of culture, leaving open the question of whether the primary inductive interactions initiated hepatocyte differentiation, or whether subsequent steps, such as may occur during cell aggregation to form the liver, were necessary. Using the technique of in situ hybridization, we find that serum albumin mRNA, a liver-specific gene product, is first detected in hepatic precursor cells of the endoderm as early as 9.5 days of mouse embryo development, a full day prior to cell aggregation and liver formation. The endodermal cells express albumin mRNA upon migration into strands of connective tissue matrix within mesenchyme. Thus, the onset of differentiation of the endoderm is coincident with its interaction with mesenchyme. Early albumin transcripts are initiated at the same site of the albumin promoter as in adult hepatocytes, suggesting that at least a subset of the transcription factors that control albumin transcription in the adult may be involved in executing the early steps of hepatic determination. We also observe a sharp increase in albumin mRNA levels shortly after the definitive formation of the liver, apparently reflecting cell interactions that enhance hepatocyte differentiation. Hepatocyte differentiation is therefore similar in several respects to pancreatic exocrine cell development, and may represent a general pattern for gut-derived tissues. For both cell types, early interactions with mesenchyme are coincident with the initial expression of differentiated gene products at a low level in proliferating endoderm, and the initial pattern of expression is amplified upon organ formation. Introduction lead to differentiation. In this paper, we define the developmental time and place of transcriptional activation of the liver-specific serum albumin gene. Our findings characterize the cell environment that influences the initial stages of hepatocyte differentiation. In mammals, the liver is formed from the developing foregut. Between 8.5 and 9.5 d of mouse gestation, a region of the foregut epithelium thickens to form the liver diverticulum. Over the next two days, endodermal cells from the liver diverticulum proliferate and migrate into the surrounding septum transversum, a region of loose mesenchyme. By day 10.5, the liver bud is recognizable microscopically (Theiler, 1989). By 12.5 d of gestation, the liver is a relatively large, differentiated organ composed of various cell types, of which up to 60% are hematopoietic cells (Silini et al. 1967; Paul et al. 1969). Hematopoietic cells migrate to the embryonic liver from the yolk sac and are not derived from the hepatic cell lineage (Johnson and Moore, 1975). Elegant tissue culture and transplantation experiments have shown that endodermal cells require two The development of the vertebrate liver is controlled by a specific sequence of cellular interactions that have been defined experimentally (LeDouarin, 1975), and that serve as a paradigm for understanding fundamental mechanisms of organogenesis. Our goal is to understand how cellular interactions in liver development lead to the selective transcription of genes that are characteristic of hepatocytes, thereby controlling the differentiated state of the cell. Studies of cell-specific gene transcription have provided a detailed account of many cis- and trans-acting regulatory factors required for gene expression in hepatocytes (Johnson, 1990) and other adult vertebrate cell types (Maniatis et al. 1987; Mitchell and Tjian, 1989). Little is known, however, about how specific genes are transcriptionally activated in a subset of cell types, or more generally, how distinct mammalian cell types are specified in development. To address these problems, it is important to know when a cell begins to differentiate and what cell interactions Key words: endoderm differentiation, hepatocyte, albumin, transcription, liver, mouse. 218 S. Cascio and K. S. Zaret inductive interactions to form cells that express hepatocyte morphology (LeDouarin, 1968, 1975). In avian embryos, prehepatic endoderm is induced first by cardiac mesoderm, giving rise to proliferating endodermal cells. Next, these endodermal cells interact with mesenchyme of the septum transversum and subsequently differentiate into hepatocytes (LeDouarin, 1968). Houssaint (1980) has observed similar inductive requirements for mammalian liver development. In each of these explant and transplantation studies, hepatocyte differentiation was denned by the acquisition of a particular cell morphology or by the accumulation of glycogen granules; these phenotypes become apparent after several days of culture in vitro or in a transplant. By this time, the hepatic precursor cells aggregate in vitro or have assembled to form the liver organ in vivo. Thus, it was not clear whether the initial expression of differentiated hepatic functions occurs during the inductive endodermal-mesenchymal interactions, or only after subsequent cellular interactions that take place upon the formation of the liver structure. In this study, we performed an in situ analysis of mRNA expression to attempt to identify earlier stages of hepatocyte differentiation, and to reveal the cellular environment necessary to activate liver-specific gene transcription. Hepatocyte-specific mRNAs have been detected in the livers of 13 d embryos, including those for albumin, alpha-fetoprotein (AFP), urea cycle enzymes (Morris etal. 1989), transthyretin, the transcription factor C/EBP (Kuo etal. 1990), and apolipoprotein-Al (Meehan etal. 1984), but the expression of liver-specific mRNAs has not been reported at earlier developmental stages. In this paper, we focus on the serum albumin gene, because previous studies had shown that by day 15 of mouse development the albumin and AFP genes are transcriptionally very active (Tilghman and Belayew, 1982; Panduro et al. 1987). We anticipated that the high level of albumin gene transcription in hepatocytes, together with its lack of transcription in other cell types (Powell et al. 1984; Liu et al. 1988) would facilitate the detection of early albumin transcripts during liver development. 20 min reflxation in 4% paraformaldehyde in PBS at 23°C. After digestion with 1/igml"1 proteinase K for 30 min at 37°C, sections were treated with 0.25% acetic anhydride for 10 min at 23°C. A 0.6 kb Hindlll mouse albumin cDNA sequence, from the coding region of the message (Kioussis etal. 1981), was cloned into the pGEM-3 vector (Promega Biotec) and used to generate RNA probes containing 3%UTP, at a specific activity of 10 7 -10 8 ctsmin~'/ig"'. Each slide was hybridized with lC^ctsmin"1 of probe for 12-16 h at 50°C. The slides were washed as described by Wilkinson et al. (1987), including the two high-stringency washes at 65°C in a solution of 50 % formamide, 2xSSC, and 1 mM dithiothreitol. The slides were dried, dipped in Kodak NTB-2 photographic emulsion, and exposed for 6 days to 6 months at 4°C. The slides were developed, stained with hematoxylin and eosin, and viewed with bright-field and dark-field optics under a Nikon microscope. RNA isolation from embryos Embryos were dissected from extra-embryonic membranes and rinsed in phosphate-buffered saline. Tissue samples, as whole embryos (days 8.5-9.5), midsections (9.5-10.5d), or livers (12.5-13.5 d) were isolated and placed into 500 (i\ of a solution containing 5 M guanidinium thiocyanate, 50 mM sodium citrate, pH7, and 0.5% sodium /V-lauryl sarcosinate (Chirgwin et al. 1979). Tissues were disrupted by pipetting the solution gently for 1-3 min. The volumes were adjusted to 840 /A with more guanidinium solution and layered onto 560 /A of a solution containing cesium chloride (lgmF 1 ) in 25 mM sodium citrate, pH5. The samples were spun at 55 000 revs min"1 for 3h in a TLS55 rotor in a TL-100 microultracentrifuge (Beckman Instruments). The RNA pellets were suspended in water and precipitated with sodium acetate and ethanol; the RNA pellets were washed with 70 % ethanol, resuspended in water, and quantitated by UV absorbance. For comparative purposes, 10 ^g of total RNA was obtained from about 2.5 whole embryos at 9.0d, 1.4 midsections of embryos at 10.5 d, 0.72 livers from embryos at 12.5 d, and 0.19 livers of embryos at 13.5 d. Primer extension analysis of RNA RNAs were hybridized to a 32P-end-labeled oligonucleotide and analyzed by primer extension with reverse transcriptase (McKnight and Kingsbury, 1982), as described by Liu etal. (1988). Aliquots (0.8 fig) of the same RNAs were electrophoresed through 1 % agarose minigels, stained with ethidium bromide, and photographed under ultraviolet light. Collagen counterstaining of mesenchyme Materials and methods In situ hybridization of mouse embryos All experiments used C3HeB/FeJ mice obtained from Jackson Laboratory, Bar Harbor, ME. We count noon of the day on which the vaginal plug is found as 0.5 d gestation. Embryonic structures and stages were confirmed by comparison with mouse embryo anatomies described by Rugh (1968) and Theiler (1989). In situ hybridization was performed essentially as described by Hogan etal. (1986) and Wilkinson etal. (1987). Carefully staged mid-gestation mouse embryos were dissected free of extra-embryonic membranes (10.5-15.5 d) or left within decidua (8.5-9.5 d) and fixed in 4% paraformaldehyde in PBS for 30-60 min on ice, dehydrated, and embedded in paraffin. 5fim sections were collected on organosilanated slides, deparaffinized, and prepared for hybridization by Paraffin sections were deparaffinized, hydrated in distilled water, stained in Van Gieson's solution (Mallory, 1961) according to the manufacturer (Poly Scientific, NY), and viewed with bright-field optics. The staining characteristics of various tissue components are described in the legend to Fig. 4. Results We used in situ hybridization to determine when serum albumin mRNA is first expressed in the mouse embryo. As seen in Figs 1 and 2, antisense RNA probes from an albumin cDNA hybridized specifically to the 12.5 d (Fig. IB, Fig. 2D) and 15.5 d (Fig. 2F) fetal mouse livers, while albumin sense strand probes did not hybridize to any tissue (Fig. ID). These findings are in Hepatic differentiation in mouse embryos 219 Fig. 1. Antisense albumin RNA probes hybridize specifically to mouse embryonic liver tissue. Bright-field (A,C,E) and dark-field (B,D,F) views at 40x original magnification of 12.5d embryo sagittal sections probed with an albumin antisense strand probe (A,B), an albumin sense strand probe (C,D), and a /3-tubulin antisense strand probe (E,F). Panel D was overexposed to show the positions of tissues. Abbreviations: L, liver; H, heart; He, head; I, intestine; Lu, lung; S, stomach; Sp, spleen; Ve, vertebrae. agreement with previous studies of mRNA isolated from embryonic liver samples (Morris etal. 1989). fitubulin mRNA was available for hybridization in all tissues (Fig. 1E,F), demonstrating that under our conditions all tissues retained hybridizable RNA. Albumin mRNA distribution in embryonic livers Hybridization to the 12.5 and 15.5 d livers was patchy, reflecting the very large proportion of hematopoietic cells in the liver at this time. By contrast, almost all cells within the liver bud of 10.5 d embryos hybridized 220 S. Cascio and K. S. Zaret v- ^ • • » * • • • ; ' • • * • - • • • • . . v---.-^. " sk te - • • : » ! Fig. 2. Increasing albumin gene expression during liver organogenesis. All sections were probed with an albumin antisense strand probe, and are oriented here in the reverse fashion from the sections in Fig. 1. Bright-field (A,C,E) and dark-field (B,D,F) views at lOOx original magnification of embryos at 10.5 d gestation (A,B; six week exposure), 12.5 d gestation (C,D, six day exposure), and 15.5d gestation (E,F, six day exposure). Abbreviations: L, liver; H, heart. uniformly to the albumin antisense probe (Fig. 2A,B). At this stage, the differentiating hepatocytes stained more darkly with eosin than the cells of the surrounding connective tissue (Fig. 2A). No hematopoietic cells were evident in the 10.5 d liver bud; the differentiating hepatocytes at this stage appeared homogeneous in both size and staining properties (as seen in higher magnification views not shown). Albumin mRNA in migrating hepatic endoderm cells In 9.5 d (20-26 somite) and earlier embryos, we found it necessary to probe serial sections over a 200-300 ^m sectioning distance to identify unambiguously hepatic precursor cells. Both sagittal and transverse sections were studied. We examined five 8.5d embryos (5-8 somites) and seven 9.0 d embryos (12-20 somites) thoroughly by serial section, but were unable to detect Hepatic differentiation in mouse embryos 221 Fig. 3. Albumin gene transcription in hepatocyte precursors of 9.5 d mouse embryos. All sections were probed with an albumin antisense RNA probe. Three different embryos are shown under bright-field (A,D,G) and dark-field (B.E.H) optics at lOOx original magnification, and under bright-field at 400x original magnification (C,F,I). The regions shown at 400x are outlined in the lOOx panels. Panels A, B, and C show a transverse section, 6 month exposure; D, E, and F are a transverse section, 6 week exposure; G, H, and I are an oblique section, 9 week exposure. Arrowheads point to hybridization grains indicating the presence of albumin transcripts. Individual hybridization grains are evident in the 400X panels. Abbreviations: E, hepatic endodermal cells migrating from the foregut; F, position of the foregut at the liver diverticulum; S, mesenchyme of the septum transversum; A, dorsal aorta; V, posterior cardinal vein; P, pleural cavity; R, nucleated erythrocytes in vessels; N, neural tube. specific hybridization to the albumin probe (data not shown). The earliest point in mouse development at which we could detect albumin mRNA by in situ hybridization was 9.5d of gestation (Fig. 3B,E,H). Exposure times of 6 weeks to 6 months revealed albumin mRNA in clusters of cells arising from the foregut epithelium and in cords of cells beginning to invade the septum transversum (Fig. 3A,D,G). Hema- 222 S. Cascio and K. S. Zaret topoietic cells appeared refractile but did not contain the hybridization grains that were evident over albumin-positive cells. High-magnification studies of the embryo sections demonstrated that only the proliferating hepatic precursors expressed albumin mRNA (Fig. 3C,F,I). The albumin mRNA-positive cells at day 9.5 were in tight clusters as they began to invade the sparsely distributed cells of the surrounding mesenchyme of the septum transversum. Because tissue explant studies showed that the migrating endoderm must interact with mesenchyme for the former to differentiate into hepatocytes (LeDouarin, 1968; Houssaint, 1980), we investigated whether at 9.5 d the albumin-positive endodermal cells were interspersed with mesenchyme. An alternative possibility was that the endodermal cells were pushing back a layer of mesenchyme; this occurs initially as the endoderm thickens and hepatic precursors first begin to proliferate (Rugh, 1968; Theiler, 1989). The septum transversum mesenchyme consists of loose connective tissue containing collagen; we therefore used Van Gieson's method to stain collagen in tissue sections from 9.5d embryos (Mallory, 1961). .Under high magnification, it was clear that the hepatic precursors were loosely organized and contacted collagen fibrils and lighter-staining cells of the mesenchyme of the septum transversum (see arrowheads, Fig. 4). Although these studies could not distinguish whether the collagen was produced by the mesenchyme or by the endodermal cells, or both, the abundance of the fibrils is similar in both the loose mesenchyme of the septum transversum and within the region invaded by the endoderm. In sum, it is clear that the initial expression of albumin mRNA occurs during the invasion of the septum transversum, when the hepatic precursor cells clearly contact cells and perhaps collagen of the mesenchyme. Dramatic increase in albumin mRNA upon liver formation We analyzed albumin mRNA in mid-gestation embryos using the primer extension method (Fig. 5), to quantitate albumin mRNA and to determine the start site of transcription over development. RNA was isolated from whole embryos at day 9 (free of extra-embryonic membranes such as yolk sac), from midsections of embryos at 10.5 d, from fetal livers at day 12.5 and 13.5, and from livers of adult mice. Primer extension was performed with an end-labeled oligonucleotide complementary to an internal sequence of the albumin mRNA, which generates an extension product of 110 nucleotides from the adult message (Liu etal. 1988). Albumin mRNA was not detectable by primer extension in whole embryos at day 9.0 (Fig. 5) or in 9.5 d embryo midsections (data not shown). However, 20,ug of RNA from 10.5 d embryo midsections contained a level of albumin mRNA that was approximately equivalent to that in 10 ng of adult liver RNA, and 5 f.ig of 12.5 d liver RNA contained an albumin mRNA level approximately equivalent to that in 300 ng adult liver A Embryo (d) 9.0 10.5 12.513.5 Liver Adult Liver 150 45 1 2 3 B 15 4.5 a a 3a 4 5 6 7 b 8 b 9 45 150 ng RNA 10 11 5 6 8 910 Fig. 5. Albumin mRNA is initiated at the adult transcription start site in early mouse embryos. (A) Albumin mRNAs from embryos at 9.0 to 13.5d gestation were analyzed by primer extension and quantitated by comparison to a dilution series of adult liver RNA. RNA was extracted from whole embryos at 9.0d (lane 5), midsections of embryos at 10.5 d (lanes 6 and 7), and livers of embryos at 12.5 and 13.5 d (lanes 8 and 9, respectively). The hybridization reactions included 20 [ig of 9.0 and 10.5d embryo RNA, or 5^g of 12.5 and 13.5 d embryo RNA, except for 10.5-3a, which contained 60/ig of 10.5 d midsection RNA. The different amounts of liver RNAs (shown in nanograms, lanes 1-4 and 10, 11) were mixed with 5 f.ig of E. coli tRNA prior to hybridization. The primer-extension products were analyzed on 6 % polyacrylamide gels and exposed to X-ray film. (B) Samples of the same RNAs used in the lanes shown in panel A were analyzed by electrophoresis on an agarose gel, stained with ethidium bromide and photographed under UV light to demonstrate the integrity of the RNA; the ribosomal RNA bands are visible. RNA (Fig. 5 and Table 1). When caluclated on a per cell basis, there is an approximately 15- to 20-fold increase in albumin mRNA upon formation of the liver organ by day 12.5 (Table 1). Given that the level of albumin mRNA in 10.5 d embryos was only several fold higher than our lower limit of detection (Fig. 5), and Fig. 4. Hepatic precursors at 9.5 d are in direct contact with connective tissue matrix and cells of the mesenchyme. Transverse sections of 9.5 d embryos were stained by Van Geison's method, which renders collagen fibers red, nuclei brown, and cytoplasm golden yellow. Arrowheads indicate stained collagen fibers in contact with hepatic precursors migrating from the liver diverticulum of the foregut. E, hepatic endodermal cells; F, position of the foregut at the liver diverticulum; S, mesenchyme of the septum transversum. Hepatic differentiation in mouse embryos Table 1. Albumin mRNA levels in mouse liver development Embryonic stage Percent of hepatocyte mass per total tissue mass Albumin mRNA molecules per hepatocytet 10.5 d 12.5 d 13.5 d Adult 3-6%* 40 %t 40 %f 90% 200 3000 6500 20000 * As estimated from our embryo midsections and by Theiler, 1989. t As determined by Paul et al. 1969, accounting for the large proportion of hematopoietic cells in the embryo liver. $ Values for embryonic stages are based upon the data in Fig. 5 and are relative to calculated values of albumin mRNA molecules (2200 bp) per liver cell for both adult mouse (Tilghman and Beleyew, 1982) and rat (Nahon et al. 1982), which were shown to contain 0.8/(g albumin mRNA per mg total liver tissue RNA. the long exposures necessary to visualize hybridization to albumin transcripts in the 9.5 d embryo sections, it was not surprising that we could not detect primer extension signals in the 9.5 d RNA sample. In all cases, albumin mRNA from embryonic tissues had the same transcription start site as albumin mRNA isolated from adult hepatocytes (Fig. 5). We conclude that the albumin promoter initiates transcription at the same site from the onset of differentiation through adult life. Discussion Our findings show that hepatic endoderm begins to differentiate at the time of interaction with mesenchyme, as evidenced by the transcription of a hepatocyte gene product, serum albumin. The fact that the albumin gene is transcribed several hundred to a thousand fold more frequently in adult hepatocytes than in other cell types (Liu et al. 1988), and that no in situ hybridization signal was detected in other cell types of the embryo (Figs 1 and 2), indicates the extreme specificity with which this gene serves as a marker for hepatocytes. Thus, hepatocyte differentiation begins prior to or during the induction of endoderm at day 9.5 of mouse embryogenesis; this stage is significantly earlier than had been identified by other studies of liver development, and occurs prior to cell assembly into a liver bud (see the Introduction). At this stage of our analysis, we cannot distinguish whether interaction with cardiac mesoderm or with mesenchyme of the septum transversum is the primary inducer of hepatic endoderm differentiation. However, as discussed further below, our findings demonstrate that the general sequence of events for hepatic differentiation is similar to that for pancreatic exocrine cell differentiation (Rutter et al. 1978), which begins very shortly after an inductive interaction between endoderm and mesenchyme. It is interesting to contrast our findings with what is known about the maintenance of adult hepatocyte differentiation. In adult hepatocytes, the transcription 223 rates of many liver-specific genes, including albumin, are exquisitely sensitive to tissue organization; liverspecific gene transcription is selectively lost shortly after hepatocytes are isolated and cultured in vitro (Clayton et al. 1985; Ben Ze'ev et al. 1988), whereas liver tissue slices in vitro can maintain their transcription rates for some time (Clayton et al. 1985). A moderate level of albumin transcription can be retained when isolated hepatocytes are cultured using a hormonally defined, serum-free medium (Jefferson et al. 1985) or an extracellular matrix substratum (Caron, 1990), indicating that liver gene transcription is dependent upon external signals such as hormones, extracellular matrix, and appropriate cell-cell contacts (Fraslin et al. 1985; Ben-Ze'ev et al. 1988). Even though albumin transcription is activated in endodermal cells that clearly lack the precise cell environment of the adult liver, we suggest that some of the aforementioned modulatory signals used in the adult may play roles in hepatic endoderm differentiation in the embryo. For example, a liverspecific enhancer sequence (Pinkert et al. 1987) upstream of the albumin gene has recently been shown to be activated by a collagen extracellular matrix in a transfected adult hepatocyte cell line (Liu etal. 1991; DiPersio etal. 1991). Conceivably, in embryogenesis the collagenous environment of the mesenchyme of the septum transversum, or such components of cardiac mesoderm, could play a direct role in transcriptionally activating the albumin gene. In many cases, such as in muscle, differentiated gene expression occurs when the cells stop dividing. We showed that the transcription of the albumin gene begins as endodermal cells enter a stage of rapid proliferation. Similarly, the initial expression of pancreatic exocrine cell enzymes parallels the onset of endodermal cell precursor proliferation from the embryonic gut (Rutter etal. 1968). Interestingly, the mouse dwarf mutation disrupts the gene encoding the transcription factor Pit-1 (GHF1) (Li et al. 1990), which normally activates the growth hormone gene in pituitary somatotrophic cells (Dolle etal. 1990). In addition to causing the loss of expression of growth hormone and other products of the anterior pituitary gland, the dwarf mutation also causes hypoplasia of the somatotrophic cells (Smith and MacDwell, 1931). Thus, there could be a general link between the onset of proliferation and the initial phase of differentiation for a number of cell types. Given that the first detectable embryonic albumin transcripts are initiated by the same promoter as are adult transcripts, it seems likely that at least a subset of the transcription factors that maintain the activity of the albumin promoter in the adult (Cereghini etal. 1987; Lichtsteiner etal. 1987; Babiss etal. (1987); review by Johnson, 1990) are switched on at the initial time of hepatic specification in the early embryo. Future experiments to define such embryonic regulatory factors must therefore investigate the hepatic endodermal cells prior to and during their proliferative stage. The long exposure times needed for detecting albumin mRNA in 9.5 d embryos (Fig. 3) suggest that 224 S. Cascio and K. S. Zaret hepatocyte precursors at this point have accumulated little albumin message. Indeed, an earlier study of albumin protein expression in mouse development, using indirect immunofluorescence, reported that albumin antigen was first detected at the liver bud stage between days 10.5 and 11.5 (Shiojiri, 1984). Conceivably, albumin gene transcription could commence upon interaction of the endoderm with cardiac mesoderm, but transcripts are not detectable until the endoderm migrates into the mesenchyme. We observed a dramatic increase in albumin mRNA accumulation between the time the cells first assembled to form the liver bud (10.5 d) and the time the liver was clearly evident (12.5 d). We estimate that about 3-6% of our 10.5 d embryo midsections were hepatic cells, while about 40% of the 12.5 d liver is composed of hepatocytes (Paul etal. 1969). Considering these points, and the relative amounts of embryo RNA assayed in each primer extension reaction (and normalized to ribosomal RNAs; Fig. 5), we find an approximately 15- to 20-fold increase in albumin mRNA between days 10.5 and 12.5 of embryogenesis (see Table 1). This level of induction agrees qualitatively with what we saw using in situ hybridization of identically processed sections of 10.5 and 12.5 d embryos (e.g. Fig. 2; see exposure times in Figure legend). It seems likely that some of the cell-cell and cell-matrix interactions that play a role in maintaining hepatocyte differentiation in the adult (discussed above) may be used to increase the initial level of liver gene expression during organ formation in the embryo. As seen here for a liver-specific gene, cell assembly into an organ serves to amplify a transcriptional state established prior to organ formation. Similarly, as pancreatic endoderm precursors proliferate and invade the mesenchyme, they initially express low levels of exocrine cell enzymes. After forming tissue structures characteristic of the pancreas, the cells begin to produce much higher amounts of pancreas-specific proteins (Rutter etal. 1978). Thus, for both hepatic and pancreatic induction, there is a two-stage increase in the production of cell-specific products; this scheme could be general for other cell types derived from gut endoderm. We suggest that the initial induction of such endodermal derivatives by mesenchyme must be accompanied by, and is perhaps executed by, the expression of particular transcriptional regulatory factors that cause the initial expression of cell-specific genes. We thank Nancy Thompson and Joan Lemire for initial advice on the in situ hybridization protocol. John Coleman, Gary Wessel, Yehudit Bergman, Patrice Milos, Mike DiPersio, and David Jackson provided valuable comments on the manuscript. 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Transcriptional and post- {Accepted 27 May 1991)