The thymus provides an essential environment for the development of T cells from haemopoietic progenitors. This environment is separated into cortical and medullary regions, each containing functionally distinct epithelial populations that are important at successive stages of T-cell development and selection. However, the developmental origin and lineage relationships between cortical and medullary epithelial cell types remain controversial. Here we describe a clonal assay to investigate the developmental potential of single, individually selected, thymic epithelial progenitors (marked with enhanced yellow fluorescent protein) developing within the normal architecture of the thymus. Using this approach, we show that cortical and medullary epithelial cells share a common origin in bipotent precursors, providing definitive evidence that they have a single rather than dual germ layer origin during embryogenesis. Our findings resolve a long-standing issue in thymus development, and are important in relation to the development of cell-based strategies for thymus disorders and the possibility of restoring function of the atrophied adult thymus.