In animal development, digestive tissues emerge from different positions of the endoderm as a result of patterning signals from overlying mesoderm. Although embryonic tissue movement during gastrulation generates an initial positional relationship between the endoderm and mesoderm, the role of subsequent endoderm movement against the mesoderm in patterning is unknown. At embryonic day 8.5 in the mouse, proliferation of cells at the leading edge of ventral-lateral endoderm, where the liver and ventral pancreas emerge, helps close off the foregut. During this time, the endoderm grows adjacent to and beyond the cardiogenic mesoderm, an inducer of the liver program and an inhibitor of the pancreas program. The homeobox gene Hex is expressed in this endoderm cell domain and in the liver and ventral pancreas buds, after organogenesis. We have found that in Hex^-/- embryos, there is a complete failure in ventral pancreatic specification, while the liver program is still induced. However, when Hex-null ventral endoderm is isolated prior to its interaction with cardiogenic mesoderm and is cultured in vitro, it activates early pancreas genes. We found that Hex controls the proliferation rate, and thus the positioning, of the leading edge of endoderm cells that grow beyond the cardiogenic mesoderm, during gut tube closure. Thus, Hex-controlled positioning of endoderm cells beyond cardiogenic mesoderm dictates ventral pancreas specification. Other endodermal transcription factors may also function morphogenetically rather than by directly regulating tissue-specific programs.