Little is known about the mechanism by which embryonic liver, lung, and pancreas progenitor cells emerge from the endodermal epithelium to initiate organogenesis. Understanding this process and its genetic control provides insight into ontogeny, developmental abnormalities, and tissue regeneration. We find that shortly after hepatic endoderm cells are specified, they undergo a transition from a columnar, gut morphology to a pseudostratified morphology, with concomitant "interkinetic nuclear migration" (INM) during cell division. INM is a hallmark of pseudostratified epithelia and the process used by neural progenitors to emerge from the neural epithelium. We find that the transition of the hepatic endoderm, but not the neural epithelium, to a pseudostratified epithelium is dependent upon the cell-autonomous activity of the homeobox gene Hex. In the absence of Hex, hepatic endoderm cells survive but maintain a columnar, simple epithelial phenotype and ectopically express Shh and other genes characteristic of the midgut epithelium. Thus, Hex promotes endoderm organogenesis by promoting the transition to a pseudostratified epithelium, which in turn allows hepatoblasts to emerge into the stromal environment and continue differentiating.