Endoderm, one of the three principal germ layers, contributes to all organs of the alimentary tract. For simplicity, this review divides formation of endodermal organs into four fundamental steps: (a) formation of endoderm during gastrulation, (b) morphogenesis of a gut tube from a sheet of cells, (c) budding of organ domains from the tube, and (d) differentiation of organ-specific cell types within the growing buds. We discuss possible mechanisms that regulate how undifferentiated endoderm becomes specified into a myriad of cell types that populate the respiratory and gastrointestinal tracts.