We investigated the mechanism of tissue induction and specification using t
he lacrimal gland as a model system. This structure begins its morphogenesi
s as a bud-like outgrowth of the conjunctival epithelium and ultimately for
ms a branched structure with secretory function. Using a reporter transgene
as a specific marker for gland epithelium, we show that the transcription
factor Pax6 is required for normal development of the gland and is probably
an important competence factor. In investigating the cell-cell signaling r
equired, we show that fibroblast growth factor (FGF) 10 is sufficient to st
imulate ectopic lacrimal bud formation in ocular explants, Expression of FG
F10 in the mesenchyme adjacent to the presumptive lacrimal bud and absence
of lacrimal gland development in FGF10-null mice strongly suggest that it i
s an endogenous inducer. This was supported by the observation that inhibit
ion of signaling by a receptor for FGF10 (receptor 2 IIIb) suppressed devel
opment of the endogenous lacrimal bud, In explants of mesenchyme-free gland
epithelium, FGF10 stimulated growth but not branching morphogenesis. This
suggested that its role in induction is to stimulate proliferation and, in
turn, that FGF10 combines with other factors to provide the instructive sig
nals required for lacrimal gland development.