Hepatic competence, or the ability to respond to hepatic-inducing signals, is regulated by a number of transcription factors broadly expressed in the endoderm. However, extrinsic signals might also regulate hepatic competence, as suggested by tissue explant studies. Here, we present genetic evidence that Fgf signaling regulates hepatic competence in zebrafish. We first show that the endoderm posterior to the liver-forming region retains hepatic competence: using transgenic lines that overexpress hepatic inducing signals following heat-shock, we found that at late somitogenesis stages Wnt8a, but not Bmp2b, overexpression could induce liver gene expression in pancreatic and intestinal bulb cells. These manipulations resulted in the appearance of ectopic hepatocytes in the intestinal bulb. Second, by overexpressing Wnt8a at various stages, we found that as embryos develop, the extent of the endodermal region retaining hepatic competence is gradually reduced. Most significantly, we found, using gain- and loss-of-function approaches, that Fgf10a signaling regulates this gradual reduction of the hepatic-competent domain. These data provide in vivo evidence that endodermal cells outside the liver-forming region retain hepatic competence and show that an extrinsic signal, Fgf10a, negatively regulates hepatic competence.