It is difficult to induce the maturation of embryonic stem (ES) cells into hepatocytes in vitro. We previously reported that Thy1-positive mesenchymal cells derived from the mouse fetal liver promote the maturation of hepatic progenitor cells. Here, we isolated alpha-fetoprotein (AFP)-producing cells from mouse ES cells for subsequent differentiation into hepatocytes in vitro by coculture with Thy1-positive cells. ES cells expressing green fluorescent protein (GFP) under the control of an AFP promoter were cultured under serum- and feeder layer-free culture conditions. The proportion of GFP-positive cells plateaued at 41.6 +/- 12.2% (means +/- SD) by day 7. GFP-positive cells, isolated by flow cytometry, were cultured in the presence or absence of Thy1-positive cells as a feeder layer. Isolated GFP-positive cells were stained for AFP, Foxa2, and albumin. The expression of mRNAs encoding tyrosine amino transferase, tryptophan 2,3-dioxygenase, and glucose-6-phosphatase were only detected following coculture with Thy1-positive cells. Following coculture with Thy1-positive cells, the isolated cells produced and stored glycogen. Ammonia clearance activity was also enhanced following coculture. Electron microscopic analysis indicated that the cocultured cells exhibited the morphologic features of mature hepatocytes. In conclusion, coculture with Thy1-positive cells in vitro induced the maturation of AFP-producing cells isolated from ES cell cultures into hepatocytes.