A cell line with the characteristics of hepatocytes was established from rat early embryonic stem cells (REES). This cell line was established using a new novel method of Ishiwata et al. from two cell embryos taken from the spontaneous dwarf rat (SDR). The hepatocyte cell line (REES-hep) was instituted from dark red colored tissue in embryos during embryogenesis using REES cell line cultured in the presence of embryotrophic factors. These cell lines were cultured with DMEM/F12 medium supplemented 10% FBS and 1 ng/ml of LIF. They were found to maintain their diploid state, were characterized with 42 normal chromosomes and proliferated to confluence; contact inhibition was also present. These cells produced albumin when cultured using a collagen sponge gel system and reconstructed in a funicular form resembling the cell cords of liver. The cells also produced albumin and bilirubin when transplanted into the spleen of SDR Reconstruction of a REES-hep cell line from early embryonic stem cells should help in treating hepatic insufficient patients. It will be valuable for further research, as an introduction to cell transplantation and application for use in a bio-hybrid typed liver apparatus.