We investigated the potential of mouse embryonic stem (ES) cells to differentiate into hepatocytes in vitro. Differentiating ES cells expressed endodermal-specific genes, such as alpha-fetoprotein, transthyretin, alpha 1-anti-trypsin and albumin, when cultured without additional growth factors and late differential markers of hepatic development, such as tyrosine aminotransferase (TAT) and glucose-6-phosphatase (G6P), when cultured in the presence of growth factors critical for late embryonic liver development. Further, induction of TAT and G6P expression was induced regardless of expression of the functional SEK1 gene, which is thought to provide a survival signal for hepatocytes during an early stage of liver morphogenesis. The data indicate that the in vitro ES differentiation system has a potential to generate mature hepatocytes. The system has also been found useful in analyzing the role of growth factors and intracellular signaling molecules in hepatic development.