The somites develop from the unsegmented paraxial mesoderm that flanks the neural tube. They form in an intrinsic process which lays down the primary segmental pattern of the vertebrate body. We review the processes of somitogenesis and somite differentiation as well as the mechanisms involved in these developmental events. Long before overt differentiation occurs, different compartments of the still epithelial somites give rise to special cell lines and to particular derivatives. By means of isotypic grafting between quail and chick embryos, it is possible to follow the fate of groups of somitic cells. In this way, the development of the myotome and the back dermis from the dorsomedial quadrant and of the hypaxial body wall and limb musculature from the dorsolateral quadrant was established. The two ventral quadrants and the somitocoele give rise to the chondrogenic/fibroblastic lineage of the sclerotome and form the vertebral column. Somite compartments can first be visualized by the expression pattern of Pax genes. Pax-3 is expressed in the dorsal part of the epithelial somite, while the ventral two thirds express Pax-1, a marker of sclerotome development. Pax-3 expression is retained also in the premitotic myogenic cells that migrate into the limb buds. In differentiating myoblasts, Pax-3 expression is turned down and taken over by the activation of MDF's. This initial event in myogenesis occurs in the absence of local signals, whereas the expression of Pax-1 in the sclerotome can be shown to be induced by signals from the notochord and floor-plate of the neural tube. Epaxial myotome differentiation is supported by the neural tube, after the neural tube has received patterning signals from the notochord. The hypaxial musculature and limb musculature differentiate independently of the axial structures. The myogenic cells migrating within the limb buds respond to signals of the lateral plate mesoderm which guide their distalward migration and pattern the muscle.