Differentiation of adult bone marrow stem cells (BMSC) into hepatocyte-like cells is commonly performed by continuous exposure to a cytokines-cocktail. Here, it is shown that the differentiation efficacy in vitro can be considerably enhanced by sequential addition of liver-specific factors (fibroblast growth factor-4, hepatocyte growth factor, insulin-transferrin-sodium selenite, and dexamethasone) in a time-dependent order that closely resembles the secretion pattern during in vivo liver embryogenesis. Quantitative RT-PCR analysis and immunocytochemistry showed that, upon sequential exposure to liver-specific factors, different stages of hepatocyte differentiation, as seen during liver embryogenesis, can be mimicked. Indeed, expression of the early hepatocyte markers alpha-fetoprotein and hepatocyte nuclear factor (HNF)3beta decreased as differentiation progressed, whereas levels of the late liver-specific markers albumin (ALB), cytokeratin (CK)18, and HNF1alpha were gradually upregulated. In contrast, cocktail treatment did not significantly alter the expression pattern of the hepatic markers. Moreover, sequentially exposed cells featured highly differentiated hepatic functions, including ALB secretion, glycogen storage, urea production, and inducible cytochrome P450-dependent activity, far more efficiently compared to the cocktail condition. In conclusion, sequential induction of the differentiation process, analogous to in vivo liver development, is crucial for in vitro differentiation of adult rat BMSC into functional hepatocyte-like cells. This model may not only be applicable for in vitro studies of endoderm differentiation but it also provides a "virtually unlimited" source of functional hepatocytes, suitable for preclinical pharmacological research and testing, and cell and organ development.