Expression of SRY-box transcription factor 17 (Sox17) in the endodermal region caudal to the hepatic diverticulum during late gastrulation is necessary for hepato-pancreato-biliary system formation. Analysis of an allelic series of promoter-proximal mutations near the transcription start site (TSS) 2 of Sox17 in mouse has revealed that gallbladder (GB) and extrahepatic bile duct (EHBD) development is exquisitely sensitive to Sox17 expression levels. Deletion of a SOX17-binding cis-regulatory element in the TSS2 promoter impairs GB and EHBD development by reducing outgrowth of the nascent biliary bud. These findings reveal the existence of a SOX17-dependent autoregulatory loop that drives Sox17 expression above a critical threshold concentration necessary for GB and EHBD development to occur, and that minor impairments in Sox17 gene expression are sufficient to impair the expression of SOX17-regulated genes in the nascent GB and EHBD system, impairing or preventing development.