Epithelial-mesenchymal interactions are critical for the formation of gastrointestinal buds such as the cecum from the midgut, but the mechanisms regulating this process remain unclear. To investigate this problem, we have studied the temporal and spatial expression of key genes known to orchestrate branching morphogenesis. At E10.5, Fibroblast growth factor 10 (Fgf10) is specifically expressed in the mesenchyme above the future cecal epithelial bud, whereas Fgfr2b is found throughout the gut epithelium. From E11.5 onwards, Fgf10 expression is found throughout the cecum mesenchyme. Other relevant signaling molecules such as Sonic hedgehog, Wnt2b, and Tbx4 transcripts are found throughout the gut epithelium, including the cecum. Epithelial expression is also seen for Sprouty2, but only from E14.5 onwards. By contrast, Bone morphogenetic 4 (Bmp4) and Pitx2 are specifically expressed in the mesenchyme of the cecal bud at E11.5. Abrogation of either Fgf10 or Fgfr2b leads to similar phenotypes characterized by an arrest of epithelial invasion into the cecal mesenchymal tissue. However, a bud of undifferentiated cecal mesenchymal tissue is maintained throughout development. Our results further indicate that mesenchymal FGF10 acts mostly through the epithelial FGFR2b receptor; thereby triggering invasion of the midgut epithelium into the adjacent mesenchyme via an increased rate of epithelial proliferation at the tip of the cecum. Thus, FGF10 signaling via FGFR2b appears to be critical in the extension of the epithelium into the mesenchyme during cecal development. © 2003 Elsevier Inc. All rights reserved.