The liver develops from the third week of fetal life when a liver bud or hepatic diverticulum appears as an outgrowth from the distal end of the primitive foregut.
This liver bud is composed of proliferating cells which grow into the ventral mesentry as cords of cells. This area of the mesentry is called the septum transversum.
As the fetus continues to develop, the cells of the liver cords differentiate into hepatocytes and bile duct epithelium as well as combining with the umbilical and vitelline veins to form the hepatic sinusoids.
At the same time, the mesoderm of the septum transversum forms the Kupffer cells and various connective tissue cells of the liver