Based on data from in vitro tissue explant and ex vivo cell/bead implantation experiments, Bmp and Fgf signaling have been proposed to regulate hepatic specification. However, genetic evidence for this hypothesis has been lacking. Here, we provide in vivo genetic evidence that Bmp and Fgf signaling are essential for hepatic specification. We utilized transgenic zebrafish that overexpress dominant-negative forms of Bmp or Fgf receptors following heat-shock induction. These transgenes allow one to bypass the early embryonic requirements for Bmp and Fgf signaling, and also to completely block Bmp or Fgf signaling. We found that the expression of hhex and prox1, the earliest liver markers in zebrafish, was severely reduced in the liver region when Bmp or Fgf signaling was blocked just before hepatic specification. However, hhex and prox1 expression in adjacent endodermal and mesodermal tissues appeared unaffected by these manipulations. Additional genetic studies indicate that the endoderm maintains competence for Bmp-mediated hepatogenesis over an extended window of embryonic development. Altogether, these data provide the first genetic evidence that Bmp and Fgf signaling are essential for hepatic specification, and suggest that endodermal cells remain competent to differentiate into hepatocytes for longer than anticipated.