The squamous-columnar junction (SCJ) is a boundary consisting of precisely positioned transitional epithelium between the squamous and columnar epithelium. Transitional epithelium is a hotspot for precancerous lesions, and is therefore clinically important; however, the origins and physiological properties of transitional epithelium have not been fully elucidated. Here, by using mouse genetics, lineage tracing, and organoid culture, we examine the development of the SCJ in the mouse stomach, and thus define the unique features of transitional epithelium. We find that two transcription factors, encoded by Sox2 and Gata4, specify primitive transitional epithelium into squamous and columnar epithelium. The proximal-distal segregation of Sox2 and Gata4 expression establishes the boundary of the unspecified transitional epithelium between committed squamous and columnar epithelium. Mechanistically, Gata4-mediated expression of the morphogen Fgf10 in the distal stomach and Sox2-mediated Fgfr2 expression in the proximal stomach induce the intermediate regional activation of MAPK/ERK, which prevents the differentiation of transitional epithelial cells within the SCJ boundary. Our results have implications for tissue regeneration and tumorigenesis, which are related to the SCJ.