One of the major hurdles of cellular therapies for the treatment of liver failure is the low availability of functional human hepatocytes. While embryonic stem (ES) cells represent a potential cell source for therapy, current methods for differentiation result in mixed cell populations or low yields of the cells of interest. Here we describe a rapid, direct differentiation method that yields a homogeneous population of endoderm-like cells with 95% purity. Mouse ES cells cultured on top of collagen-sandwiched hepatocytes differentiated and proliferated into a uniform and homogeneous cell population of endoderm-like cells. The endoderm-like cell population was positive for Foxa2, Sox17, and AFP and could be further differentiated into hepatocyte-like cells, demonstrating hepatic morphology, functionality, and gene and protein expression. Incorporating the hepatocyte-like cells into a bioartificial liver device to treat fulminant hepatic failure improved animal survival, thereby underscoring the therapeutic potential of these cells.