The mechanisms that subdivide the endoderm into the discrete primordia that give rise to organs such as the pancreas and liver are not well understood. However, it is known that retinoic acid (RA) signaling is critical for regionalization of the vertebrate embryo: when RA signaling is either prevented or augmented, anteroposterior (AP) patterning of the CNS and mesoderm is altered and major developmental defects occur. We have investigated the role of RA signaling in regionalization of the zebrafish endoderm. Using a mutant that prevents RA synthesis and an antagonist of the RA receptors, we show that specification of both the pancreas and liver requires RA signaling. By contrast, RA signaling is not required for the formation of the endodermal germ layer or for differentiation of other endodermal organs. Timed antagonist and RA treatments show that the RA-dependent step in pancreatic specification occurs at the end of gastrulation, significantly earlier than the expression of known markers of pancreatic progenitors. In addition to being required for pancreatic specification, RA has the capacity to transfate anterior endoderm to a pancreatic fate.