In order to generate the tissues and organs of a multicellular organism, different cell types have to be generated during embryonic development. The first step in this process of cellular diversification is the formation of the three germ layers: ectoderm, endoderm and mesoderm. The ectoderm gives rise to the nervous system, epidermis and various neural crest-derived tissues, the endoderm goes on to form the gastrointestinal, respiratory and urinary systems as well as many endocrine glands, and the mesoderm will form the notochord, axial skeleton, cartilage, connective tissue, trunk muscles, kidneys and blood. Classic experiments in amphibian embryos revealed the tissue interactions involved in germ layer formation and provided the groundwork for the identification of secreted and intracellular factors involved in this process. We will begin this review by summarising the key findings of those studies. We will then evaluate them in the light of more recent genetic studies that helped clarify which of the previously identified factors are required for germ layer formation in vivo, and to what extent the mechanisms identified in amphibians are conserved across other vertebrate species. Collectively, these studies have started to reveal the gene regulatory network (GRN) underlying vertebrate germ layer specification and we will conclude our review by providing examples how our understanding of this GRN can be employed to differentiate stem cells in a targeted fashion for therapeutic purposes.