We have attempted to generate embryonic stem (ES) cell-derived hepatocytes expressing liver-specific functional properties by use of ES cell technology. It was found that ES cells are allowed to differentiate into hepatocytes possessing high metabolic activities when hepatocyte nuclear factor (HNF)-3beta-transfected ES cells are cultured in alpha-MEM medium supplemented with 10% fetal bovine serum (FBS) and fibroblast growth factor (FGF)-2 in the three-dimensional cell culture system at 5% CO2. The differentiated cells induced albumin, triacylglycerol, urea, and glycogen synthesis as well as further expression of metabolic proteins and serum factors as markers of hepatocytic differentiation for at least 4 months. The cells differentiated from HNF-3beta-transfected ES cells also had hepatocyte-like ultrastructural characteristics, including several endoplasmic reticula, mitochondrion, and glycogen. Our findings indicate that generation of hepatocytes maintaining high metabolic functions developed from mouse ES cells will facilitate the study of the basic mechanism for hepatogenesis and will certainly provide new opportunities for tissue transplantation.