The transition from specification of cell identity to the differentiation of cells into an appropriate and enduring state is critical to the development of embryos. Transcriptional profiling in Caenorhabditis elegans has revealed a large number of genes that are expressed in the fully differentiated intestine; however, no regulatory factor has been found to be essential to initiate their expression once the endoderm has been specified. These gut-expressed genes possess a preponderance of GATA factor binding sites and one GATA factor, ELT-2, fulfills the expected characteristics of a key regulator of these genes based on its persistent expression exclusively in the developing and differentiated intestine and its ability to bind these regulatory sites. However, a striking characteristic of elt-2(0) knockout mutants is that while they die shortly after hatching owing to an obstructed gut passage, they nevertheless contain a gut that has undergone complete morphological differentiation. We have discovered a second gut-specific GATA factor, ELT-7, that profoundly synergizes with ELT-2 to create a transcriptional switch essential for gut cell differentiation. ELT-7 is first expressed in the early endoderm lineage and, when expressed ectopically, is sufficient to activate gut differentiation in nonendodermal progenitors. elt-7 is transcriptionally activated by the redundant endoderm-specifying factors END-1 and -3, and its product in turn activates both its own expression and that of elt-2, constituting an apparent positive feedback system. While elt-7 loss-of-function mutants lack a discernible phenotype, simultaneous loss of both elt-7 and elt-2 results in a striking all-or-none block to morphological differentiation of groups of gut cells with a region-specific bias, as well as reduced or abolished gut-specific expression of a number of terminal differentiation genes. ELT-2 and -7 synergize not only in activation of gene expression but also in repression of a gene that is normally expressed in the valve cells, which immediately flank the termini of the gut tube. Our results point to a developmental strategy whereby positive feedback and cross-regulatory interactions between two synergistically acting regulatory factors promote a decisive and persistent transition of specified endoderm progenitors into the program of intestinal differentiation.